Impact of GST rate cuts fading? FMCG prices rise up to 5%; what's fueling the latest hike

September’s GST cuts had helped keep prices steady for a while, but now, almost six months in, the phase is ending. India’s consumer goods makers now increasing prices by up to 5%, as rising commodity costs and weak rupee put pressure on margins.

The impact is now visible in stores this quarter, with distributors saying that selected packs of everyday essentials, including detergents, hair oils, chocolates, noodles and breakfast cereals, are reaching shelves with higher price tags, according to ET.

The latest round of increases come after a period of during which companies had swiftly passed on tax benefits after GST rates were lowered across multiple consumer categories.

Firms had acted cautiously at the time to avoid scrutiny under antiprofiteering regulations. With that phase now behind them, companies are beginning to exercise pricing power once again.

Mohit Malhotra, chief executive of Dabur India, told ET that the company, which makes Real juice and Vatika hair oil, is implementing a 2% price increase in the ongoing fourth quarter. The higher pricing, he added, will continue into the next year.

“We had to postpone the price hikes due to the antiprofiteering issue,” he said.

The pressure on margins has intensified amid rising commodity prices and sustained currency weakness. Crude oil prices have firmed up in recent weeks, lifting costs of related commodities such as sulphur and n-paraffins. Coconut oil prices have doubled over the past year. Meanwhile, the rupee has been sliding for several months, touching an all-time intraday low of Rs 92.02 against the dollar on January 30, affected by trade deficits and global imbalances.

The depreciation has pushed up the cost of imported inputs.

“A lot of ingredients in breakfast staples, such as oats and almonds, are imported... The depreciation of the rupee has significantly increased costs of imports,” said Aditya Bagri, group director at breakfast cereals, muesli and oats maker Bagrry’s. “We are exploring a marginal increase in prices this quarter on select packs,” the official further added.

Home and personal care manufacturers are also grappling with higher raw material expenses, given their dependence on crude oil derivatives that influence the cost of commodities such as liquid paraffin and surfactants.

“Home care price increases will be (seen) soon. Some (packs with increased price tags) are already going into the market, and some will follow,” Niranjan Gupta, chief financial officer at Hindustan Unilever, said during an investor call last week.

The company is raising prices across its home care portfolio, including Surf Excel, Rin, Vim and Domex.

At Tata Consumer Products, tea prices have also shown movement. “There was a small uptick on tea prices at the end of the (December) quarter,” managing director Sunil D’ Souza said after the third-quarter earnings. “But remember, January to early April…will determine opening prices then. We will be flexible on moving (prices) up or down depending on how the commodity fares when the season opens.

We have already passed on most of the increases in this quarter.

However, even with higher revenues, profitability remains under pressure. A report by financial services firm Systematix Group on Tuesday noted that while FMCG companies recorded 9% year-on-year revenue growth in the third quarter of FY26, margin expansion has been constrained.

Average sales volumes rose 6% year-on-year, supported by GST-linked reductions in categories such as biscuits, noodles and snack foods, the report said.