Sudhir Sitapati on how GST cuts will boost GCPL’s growth and reshape FMCG

New Delhi: Recent government measures, including income tax cuts and a reduction in Goods and Services Tax (GST) rates, are poised to drive consumption and growth in the Fast-Moving Consumer Goods (FMCG) sector, according to Sudhir Sitapati, Managing Director and CEO of Godrej Consumer Products and Chairman of the CII National Committee on FMCG.

“Both the income tax cut and the reduction in GST across the board will spur consumption,” Sitapati said, expressing gratitude to the government for the reforms.

“Consumption has been a bit soft for a few years, but we have no doubt that this combination of income tax and GST measures will boost growth across sectors. I say this not just for Godrej Consumer, but wearing my CII FMCG hat as well.”

The GST reduction is expected to particularly benefit Godrej Consumer’s soap category, which constitutes approximately 35% of its business. “The soap category has been growing volumes at about 2% a year for the last four to five years. With the GST cut, the category growth may go up by a couple of percent,” Sitapati noted. He highlighted that soaps, being a significant part of household expenditure for lower-income consumers, will free up disposable income for other purchases, indirectly boosting other categories.

Sitapati emphasized the broader impact of the GST rationalization: “Not only the categories where rates have been reduced will benefit, but even categories where GST has not been reduced will see an uptick, as the overall available spend on consumption and discretionary expenses goes up.” This has led Godrej Consumer to express optimism across its entire portfolio.

However, the transition may bring short-term challenges. “The FMCG sector operates on an MRP regime, and stocks that dealers and companies are sitting on today are at higher MRPs,” Sitapati explained. “Simply passing on money to trade does not guarantee that it reaches consumers directly. It will take a little time before new MRPs flow into the market.”

He anticipates that by early or mid-October, consumers will begin to see reduced prices, with September likely to experience disruptions due to pipeline changes and stock adjustments. “From Q3 onwards, we expect stronger growth momentum,” he added.

The GST cuts are expected to have a “meaningful and material” impact on Godrej Consumer’s portfolio and the broader FMCG sector. Despite near-term disruptions like heavy rainfall in parts of India, Sitapati believes the fiscal year will outperform earlier expectations. “The current fiscal will be better than what we had previously envisaged,” he said.

Sitapati outlined three anticipated effects on consumer behavior: increased consumption of essentials like soaps and hair oils, more disposable income for other purchases due to lower spending on essentials, and a shift in competitiveness from unorganized players to branded companies.

“As seen during GST 1.0, a lot of the unorganised sector, which does not pay tax or operates illegally, will either come into the tax net or lose competitiveness,” he stated. “This strengthens branded players like us who comply with tax laws.”

Looking ahead, Godrej Consumer remains confident in its financial outlook, maintaining guidance of high single-digit revenue growth and double-digit EBITDA growth for FY26. “India margins are expected to move to the mid-20s in the second half of the year, and we will continue to evaluate as the benefits of GST rationalization play out,” Sitapati concluded, acknowledging variables such as raw material prices and pipeline adjustments.