FMCG stocks get a GST leg-up, jump up to 7%

New Delhi: FMCG stocks stepped into the limelight today, surging up to 7 percent, as common use products such as hair oil, soaps and toothpaste will cost less from July 1 when GST is due to set in.

Investor sentiment was upbeat following progress on the GST front, with the GST Council finalising rates for most goods.

Shares of Tata Coffee rose by 6.84 percent, Colgate Palmolive jumped 6.53 percent and ITC 6.27 percent on the BSE.

Among others, Marico gained 4.84 percent, KRBL (4.59 percent), Emami (3.65 percent), HUL (3.5 percent) and Britannia Industries (3.36 percent).

Following the jump in these stocks, the BSE FMCG index was trading 2.56 percent higher at 9,693.49 during the late morning trade.

"GST rates for select products have been disclosed wherein lower tax rates on FMCG products was on expected lines," Edelweiss Research said in a report.

On the first day of a two-day meeting of the GST Council yesterday, it was decided that commonly used products like hair oil, soaps and toothpaste will be charged with a single national sales tax or GST of 18 percent.

These items at present attract 22-24 percent tax incidence through a combination of central and state government levies.

FMCG firms Dabur and Emami welcomed the rates on commonly used consumer items, stating it would be beneficial but more clarity is needed to figure our the overall impact.

"The announcement of 18 percent GST rate for soaps, toothpaste and hair oil is along the expected lines and is certainly welcome. It will have a positive impact on our business," Dabur India CEO Sunil Duggal said.

He, however, said this covered only about 20 percent of the company's business and "we are still awaiting clarity on categories like health supplements, shampoos and packaged juices (among others)".

Echoing his views, Emami CEO (finance, strategy and business development) said: "It appears that the rate will benefit us and the industry, but we need to understand GST (rates) in entirety to comment on the subject."