GST: Washing And Smoking To Get Costlier
Price hikes for detergents and cigarettes as companies to pass on tax hike to consumers.
Washing clothes will get costlier, while bath soaps will get cheaper once the Goods and Services Tax (GST) is rolled out. The GST Council which fixed the tax rate on 1,211 products on Thursday, has kept most rates unchanged, but some things will cost more.
The GST Council has placed detergents in the 28 percent tax bracket, which is an increase of as much as 6 percent over the existing structure. Current taxes add up to 22-24 percent.
Washing powder contributes 20-28 percent to the revenue of the country’s largest home products company Hindustan Unilever Ltd. Detergents also contribute 9-10 percent to Godrej Consumer Products Ltd.’s topline.
Both companies are yet to respond to email queries sent by BloombergQuint.
The companies will pass on the higher levy to customers, said Ajay Thakur, research analyst at Anand Rathi Securities.
Companies will resort to price increases and pass it on to the consumer, it shouldn’t pose as a problem. However, there is a possibility that branded players can eat into the market share of unorganised players.Ajay Thakur, Research Analyst, Anand Rathi Securities
Smoking To Get Costlier
The GST Council has hiked the tax on filter and non-filter cigarettes by imposing a cess of 5 percent in addition to the existing ad valorem rate. Analysts had been expecting a higher tax burden on tobacco products.
Here too, tobacco companies are expected to pass on the additional tax to consumers, said brokerage firm Morgan Stanley.
The only change versus our expectation is the levy of an additional 5 percent ad-valorem component. Based on our calculations, ITC Ltd. will need a 3-4 percent price hike to offset this additional levy.Morgan Stanley Report on ITC