Packaged food companies anticipate a significant shift from unbranded to branded products. This change is expected in categories like paneer, ghee and namkeens. The GST reduction will narrow the price gap. The price difference with local varieties will decrease by 4-13%. The GST council reduced taxes on daily use food items. New rates will be effective from September 22.
Packaged food companies expect a big shift from unbranded to branded products in categories like paneer, ghee, desi namkeens, sausages, and bakery products like biscuits and soya nuggets as the GST reduction on these will narrow the price gap with the loose variety sold in the market.
The executives said the price difference with local unbranded varieties will narrow down by 4-13% due to the drop in taxes and could go a bit higher too as a lot of input materials have seen a reduction in GST rates as well.
"The reduction in GST on dairy products will help in growth of branded products and curb the massive adulteration in products like ghee and paneer," said Jayen Mehta, managing director, Gujarat Cooperative Milk Marketing Federation (GCMMF), which sells the Amul brand of dairy products.
Biscuit and namkeen maker Parle Products VP Mayank Shah said packaged namkeen prices should drop by 4.5-5% or pack weight going up. "This will help the shift from unbranded, loose segments to the branded segment," he said.
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The GST Council on Wednesday reduced the GST on multiple daily use food items which also have a huge parallel unbranded market. The 5% GST on branded paneer, pizza bread, khakhra has been struck down as also the 18% levy on paratha and other Indian breads.
GST on a lot of branded products have been reduced from 12% to 5% such as ghee, sausages, confectionery, groundnut, cashew nut, tender coconut water, namkeens, bhujia, mixture, soya nuggets, and pulse nuggets or bari. Some products like cake, pastry, biscuits, ice cream and edible ice too have seen a drop from 18% to 5%. These new rates will be effective from September 22.
Manish Bandlish, managing director of Mother Dairy, said the GST cut will significantly enhance affordability and accessibility of value-added dairy products. "This is a particularly big boost for packaged categories, which are fast-growing favourites in Indian homes and will see stronger demand momentum going forward," he said.
Prices of branded ice cream manufacturers are expected to be at par with the unorganised sector players.
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