FMCG and Consumer Issues - Newspaper Summary

 The sources highlight the significant impact of the Goods and Services Tax (GST) system, particularly the recent "GST 2.0" rate rationalization, on the Fast-Moving Consumer Goods (FMCG) sector and broader consumer rights and behavior in India's economic and regulatory landscape in October 2025.

Impact of GST Rate Cuts (GST 2.0)

The implementation of GST rate cuts (referred to as GST 2.0) has generated both economic optimism and regulatory scrutiny concerning consumer benefit:

• Economic Boost and Festival Enthusiasm: The massive GST rate cut has been described as a "festive gift" for both traders and consumers, providing a significant boost to sales across categories. The Confederation of All India Traders (CAIT) expects festival season trade worth ₹4.75 lakh crore, fueled in part by the GST rate cut. The cut has also ignited festival enthusiasm among traders and consumers.
• FMCG Sector Benefit: FMCG major Marico Ltd. reported that 30% of its India domestic business benefited from the implementation of GST 2.0. The company stated that it passed on the benefits of the revised GST rates to consumers across relevant product categories, thereby reinforcing affordability and accessibility. Consumer sentiments were reported to have improved.
• Monetary Policy Reaction: Concerns about the potential revenue shortfall due to GST cuts led to a spike in 10-year G-Sec yields in August 2025, although yields later stabilized.

Regulatory Scrutiny and Consumer Rights

A central theme in the sources is the strict enforcement by the judiciary and government to ensure that the benefits of GST cuts reach the end consumer, leading to a "rattled" FMCG industry.

Delhi High Court Mandate on Price Cuts

The Delhi High Court issued a recent order mandating that GST rate reductions must be passed on to consumers explicitly through transparent price cuts, not through indirect adjustments like increasing product grammage or offering promotions.

• Deception Defined: The High Court stated unequivocally that increasing the quantity while maintaining the maximum retail price (MRP) after the GST rate reduction constitutes deception. The court opined that non-reduction of price cannot be justified on the grounds of increased quantity or ongoing promotional schemes, as this defeats the entire purpose of the GST rate reduction.
• FMCG Compliance Challenge: This ruling left the FMCG industry in a "tizzy," particularly regarding small packs priced at popular price points like ₹5 and ₹10. While some companies initially cut prices on large packs and increased grammage on small packs (citing coinage-related challenges), the ruling forces a shift.
• Industry Response: Companies like Hindustan Unilever Ltd (HUL) and Bisleri International confirmed implementing price reductions to fully pass on the GST benefits, including on small packs.
• Regulatory Powers: The court affirmed that the authority defined under the anti-profiteering mechanism (the GST Appellate Tribunal, taking over functions previously held by NAPA and CCI) has the power to order the defaulting business to reduce prices, return the undue benefit, deposit it into the Consumer Welfare Fund, and even cancel the business entity's GST registration in extreme cases.

Issues with E-Commerce and Digital Compliance

The government is actively monitoring e-commerce platforms to ensure compliance with the regulatory intent of GST rate rationalization. Beyond GST compliance, the government is addressing other consumer issues:

• "Dark Patterns" and Cash-on-Delivery (CoD) Charges: The Union Minister of Consumer Affairs, Food and Public Distribution noted that the government is investigating complaints against e-commerce platforms for charging customers extra for cash-on-delivery, classifying this practice as a "dark pattern" that misleads and exploits consumers. Strict action will be taken against violators to uphold transparency and fair practices.
• Flipkart's GTA Rate Card Restructuring: Flipkart's revised Goods Transport Agency (GTA) rate card is pushing logistics costs onto sellers, causing a shockwave by squeezing already thin margins. Sellers allege that Flipkart is unfairly using the small-transporter GST rule to boost its own reported toplines while shrinking sellers' revenues. This shift is estimated to impact sellers' e-commerce revenues by 15% annually and their overall company-level revenue by approximately 2%. Experts warn that artificially recasting marketplace fees as transport charges may no longer be allowed under recent GST rules changes.

Changing Consumer Preferences and Retail Structure

The consumer landscape is also undergoing a fundamental shift in purchasing habits:

• Decline of Hypermarkets: Urban shoppers are increasingly moving away from traditional hypermarkets (large grocery-driven formats) toward gourmet and premium retail formats. Hypermarkets are struggling due to rising rents, high utility costs, and intensifying competition from quick-commerce (q-comm) players that offer grocery deliveries in minutes.
• Shift to Speciality Retail: This trend is driven by Indian consumers often preferring smaller, frequent purchases over bulk buying. Speciality and premium retailers are attractive to mall operators because they generate ** higher margins per square foot**.
• Malls' Adaptation: Malls are adapting by reducing the footprint of hypermarkets and replacing them with food halls, entertainment centers, and co-working hubs to boost footfall and rental yields, demonstrating a structural change in retail focus from volume-driven sales to experience and margin-driven models.
• Foreign Investment Interest: The board of French cosmetics giant L’Oréal, the world’s largest beauty group, is visiting India to explore opportunities, noting that India is one of the fastest-growing beauty markets globally and is expected to grow from $21 billion to $34 billion in four years.