FMCG firms flag inverted duty hit to P&L post GST 2.0

THE RECENT GST rate ratio-nalisation while triggering demand for fast-moving consumer goods (FMCG) companies has created fresh headaches in the form of an inverted duty structure (IDS).

- VIVEAT SUSAN PINTO

This occurs when the tax on inputs is higher than that on the finished goods, leaving working capital locked and profits under strain.

Most food and beverage products now attract a 5% GST — down from 12% or 18% earlier — but the tax on input services such as marketing, advertising, logistics, warehousing and distribution remains at 18%, with no offset available. Top FMCG executives warn that if the anomaly persists, it could dent profitability in the coming months.

Companies such as Dabur estimate a potential hit of ~90-100 crore to their P&L accounts if the blockage of working capital continues.