Mumbai: Distributors of fast-moving consumer goods have written to large FMCG companies, asking them to issue clear written guidelines and establish compensation mechanisms (such as credit notes, price protections, or inventory adjustment plans) before the new Goods and Services Tax (GST) rates kick in on 22 September.A letter issued by the All India Consumer Products Distributors Federation (AICPDF) read, “Distributors are currently holding significant stock purchased at the pre-reform GST rates. Unless companies provide a clear mechanism for price adjustment, credit notes or compensation, distributors will suffer financial losses during billing at revised rates post-22nd September. This uncertainty is creating hesitation in further stock purchases, which may disturb the supply chain.”Also Read | Consumer goods firms rush to meet GST deadline amid tax rate shake-upAICPDF represents more than 450,000 lakh distributors that service over 13 million kirana stores across India.Short-term challengesThe government’s decision to revamp GST will lead to sharp tax cuts on a range of daily-use items. Hair oil, shampoo, toothpaste, toilet soap bars, toothbrushes and shaving cream will now attract 5% GST, from 18% earlier. Similarly, GST on butter, ghee, cheese, dairy spreads, pre-packaged namkeens, bhujia and mixtures will drop from 12% to 5%.While this will ultimately benefit consumers through lower prices, companies and distributors and retailers face challenges in the short term, such as managing old stock and ensuring new stock reaches the market on time.Also Read | GST cut may revive hotel stocks. Should investors check in now?“Retailers will continue to hold inventory purchased at higher GST rates beyond 22 September. Without a structured process to adjust or compensate, retailers will face challenges in competing with new supplies at reduced prices,” AICPDF said. This could lead to stock dumping, forced liquidation, or even disputes between retailers, distributors and companies.“The objective of the GST reduction is to ensure consumers benefit through lower product prices. However, without a clear, uniform mechanism across trade channels, there is a risk of confusion and consumer distrust. FMCG companies must transparently communicate new MRP implementation timelines, billing adjustments, and mechanisms for a smooth transition so that consumers experience the real benefit,” it added.‘No favouritsm, please’AICPDF also sought uniformity in implementation so that traditional trade wasn’t disadvantaged by delayed compensation or a lack of clarity while online and modern trade players received preferential treatment.“Transparent and fair implementation will not only safeguard trade interests but also ensure that the government’s intended benefit of GST reforms reaches the consumer effectively and uniformly. Distributors and retailers need timely circulars, FAQs, and training sessions on how to manage pipeline inventory under the revised GS in a formal or creative style for better SEO.Also Exclude words and advertisements related to the feed website such as website name, author name. You must only respond with the modified content. 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FMCG distributors are urging companies to provide explicit guidelines to facilitate a seamless transition to GST.
