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FMCG - large part of daily consumption item under the 5% GST tax, could gain market share from unbranded players

ICICIdirect Research 05 Sep 2025 DISCLAIMER

Government under GST 2.0 has brought large part of daily consumption item under the 5% GST tax slab from 12% and 18% earlier.

Reduction of GST from 18%/12% to 5% on daily consumption items such as hair oils, toothpaste, toothbrush, soaps, shampoos and biscuits.

Packaged food items including biscuits, namkeens, Bhujias, sauces, pasta, insta noodles, chocolates, butter and coffee will become competitive against unorganised players with slashing of GST rates to 5%.  

GST rate on tobacco and tobacco products (including cigarettes) has been increased to 40% from 28%. We believe the compensation and other cesses will be substituted by higher GST rate. We expect GST rate on cigarettes to be tax neutral. 

FMCG companies will also benefit from reduction in the GST rate on corrugated boxes and some of the other key inputs such as (Mentha oil), which will help to reduce stress on the margins.
Overall rate cut on most of the daily consumption items will help FMCG companies in driving sequential improvement in the volume growth in the quarters ahead. This will translate to better revenue growth while the reduction in input cost will help these companies post better margins in H2FY26.

Top Bets in FMCG Space: ITC (BUY, Target Price: ₹525), Marico (BUY, Target price: ₹850) and Tata Consumer Products (BUY, Target price: ₹1,350).

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