FMCG SECTOR The Indian FMCG sector is the

FMCG SECTOR The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13. 1 billion. As per the Pre GST regime , FMCG has to pay many taxes like VAT, Service Tax, Excise Duty, Central Sales tax. After GST law implemented it covers all the above tax one single point of the tax in form of GST has been listed under the 4 broad categories. (5%, 12%, 18%, 28% etc). ITEMS POST GST RATE (%) PRE GST RATE(%) CHANGES(%) Aluminum Foil 18 28 -10 Agarbatti 5 0 5 Preserved Vegetables 18 0 18 Butter, ghee, cheese 12 6 6 Dry fruits 12 6 6

CONT. . . ITEMS POST GST RATE (%) PRE GST RATE(%) CHANGES(%) Jams, jellies 18 12 6 Frozen meal 12 6 6 Branded paneer 5 0 5 Branded cereals 5 0 5 Cocoa butter, oils chocolates 28 26 2 Instant, aroma coffee 28 26 2 Coffee concentrates, custard powder 28 26 2 Protein concentrates, sugar syrups 28 26 2 Razors 28 26 2

CONT. . . ITEMS POST GST RATE (%) PRE GST RATE(%) CHANGES(%) Dental floss 28 26 2 Toothpaste 18 24 -26 2 Deodorants 28 26 2 Aftershave 28 26 2 Shaving cream 28 26 2 Cereals 0 0 0 Puffed, rice, papad, bread Exempt 0 - Aquatic/poultry/cattle feed Salt Exempt 0 0 - 5 6 -1 Soyabean, groundnut, sunflower, seeds

CONT. . . ITEMS POST GST RATE (%) PRE GST RATE(%) CHANGES(%) Infant use preparations Pasta, corn flakes, and cakes Coffee, tea 18 18 5 19. 5 6 -1. 5 -1 Frozen vegetables 5 6 -1 Condensed milk 18 18. 5 -0. 5 Toilet paper 18 18. 5 -0. 5 Hot water bottles 18 18. 5 -0. 5 Petroleum jelly, paraffin wax 18 20 -2 Pencil sharpeners, knives 12 18. 5 -6. 5

CONT. . . ITEMS POST GST RATE (%) PRE GST RATE(%) CHANGES(%) Meats & fish preparations 12 18. 5 -6. 5 Sweetmeats 5 12 -7 Bakery mixes, dough’s, pizza bread 5 12 -7 Vegetable fats & oils Tea concentrates, sauces, soups 5 5 12 12 -7 -7 Ice cream, instant food mixes, sherbet Refined sugar 18 26 -8 Soap 18 26 -8 Hair oil 18 26 -8

CONT. . . ITEMS POST GST RATE (%) PRE GST RATE(%) CHANGES(%) Handmade safety matches Broomsticks 5 5 18 -13. 5 -13 Candles 12 26 -14 Tooth powder 12 26 -14 Led lights 12 26 -14 Baby Foods 18 18 0 Milk beverages 12 26 -14 Ready to eat namkeen/bhujiya 12 26 -14 Beet sugar, cane sugar 5 26 -21

CONT. . . ITEMS Cigarettes Refrigerators Manicure, pedicure sets Perfumes Beauty or Make up Preparations Skincare items including sunscreen Shampoos, Hair Cream, Hair dyes Wigs, false beards, eyelashes POST GST RATE (%) PRE GST RATE(%) CHANGES(%) 28+cess 28 28 Excise duty+ 26% VAT 26 26 2 2 28 28 26 2 28 26 2 The GST rate structure shows that not all FMCG companies stand to benefit from the new regime. Some companies may gain & some lose by their segment, means GST on FMCG sector marginally impacted to the company.

GST IMPACT ON FMCG SECTOR : § Indian FMCG companies set up their warehouses in states like Himachal Pradesh/Uttaranchal . After implantation of GST the effective tax rate has come down from 40% to 20%. They don’t have to pay central sales tax if they do a stock transfer to warehouses. § Reduction in GST rate may reduce the prices of the product. Reduction of the prices will be improving the competition of product as well as in volume of sector & markets also go ahead. § As consumption of people increase, ultimately GDP will rise. § As an analyst we have a positive view on FMCG sector as a whole. Companies like HUL, Emami, Colgate palm, Britannia will be benefitted.

HUL § HUL is the Indian wing of the Multinational consumer goods company lever International. HUL has a market cap of Rs. 2, 39, 130. 04 Cr with traded at Rs. 1104 as on 7 th July 2017. Company has 4 segments like: § Home care § Personal care § Foods § Refreshment GST IMPACT ON HUL § As the GST rate lower in soaps by 8% from 26% in pre GST as against 18% in post GST.

CONT. . . § As the GST rate lower in soaps by 8% from 26% in pre GST as against 18% in post GST. § Under Home care, The Company has slashed the price of its detergent soap Rin bar of 250 gm to Rs 15 from Rs 18 and increased weight (grammage) of its Surf Excel bar costing Rs 10 to 105 gm from 95 gm at the same price. Company & customer will get more benefit as per the new GST regime. In home care Segment Company will get mostly 4 -5% benefit. § Personal care includes personal wash, skin care & hair care. GST rate for products like hair oil, soaps and toothpaste has been lowered by 8% to 18% in post GST as against from 26% in pre GST. Company is also offering 33 per cent extra in Dove bathing bar.

CONT. . . § The food processing industry such as jaggery, cereals and milk, being exempted from GST, is expected to be beneficial for the company. § Sales volume on Tea & coffee may increase by 1 -2% due to decrease in tax rates. § Competition will improve in global market. § HUL earned good profit today; lower prices could potentially support the volume growth of certain product particularly in rural segment.