FMCG Stocks Rally on GST Rate Cuts: Britannia, Colgate, Nestle Lead Gains
- 4th September 2025
- 03:00:00 PM
- 3 min read
Summary
FMCG stocks surged on September 4 after the GST Council announced major rate cuts on daily-use essentials. Britannia Industries and Emami led the rally with gains of over 4%, while Colgate-Palmolive (India) rose 3.7% and Nestle India added 2.3%. Conversely, beverage stocks such as Tata Consumer Products and Varun Beverages slipped as GST on caffeinated and carbonated drinks was hiked to 40%.
Mumbai | September 4 – FMCG stocks opened sharply higher on Thursday after the GST Council approved a major overhaul of the Goods and Services Tax structure. The move, aimed at simplifying tax slabs and encouraging domestic consumption, supported companies in the consumer staples space while pressuring select beverage stocks.
The NIFTY FMCG index rose 1.04% in morning trade, with nine of its 15 constituents in positive territory. Britannia Industries and Emami were the top gainers, both rising over 4%, followed by Colgate-Palmolive (India) at 3.7% and Nestle India up 2.28%. On the downside, Tata Consumer Products slipped over 2% to ₹1,081.80, while Godrej Consumer Products and Radico Khaitan fell 1.9% and 0.64%, respectively. Shares of Varun Beverages and United Breweries were also in the red.
Also Read: GST 2.0 Leaves Gold, Silver Jewellery Untouched at 3% Amid Wider Tax Cuts
GST Rate Cuts Boost FMCG Shares
The rally reflects investor optimism over lower taxes on daily-use items. The GST Council simplified the rate structure from four slabs—5%, 12%, 18%, and 28%—to two main slabs of 5% and 18%, effective September 22. A special 40% rate will apply to select luxury and non-essential items, including high-end cars, tobacco, and cigarettes.
Daily-use food items such as butter, ghee, dry fruits, condensed milk, cornflakes, biscuits, ice cream, and sausages will now attract 5% GST, down from 18%. Chapatis and parathas move to a nil tax rate from the current 5%. Household and personal care products—including shampoo, toothpaste, hair oil, talcum powder, soap, and tableware—also saw their tax rates cut from 18% to 5%.
The changes are expected to boost discretionary consumer spending and benefit companies with significant exposure to daily essentials.
Pressure on Beverage Stocks
Not all segments saw gains. Varun Beverages, one of India’s largest PepsiCo franchisees, declined as the GST on carbonated beverages increased to 40% from 28%. Similarly, Tata Consumer Products, which owns Tata Tea, Tetley, Eight O’Clock Coffee, and Tata Coffee, fell after GST on caffeinated and non-alcoholic beverages was raised to 40%.
The tax increase on sugar-sweetened and aerated drinks is likely to impact volumes in the short term. Shares of Radico Khaitan and United Breweries were also lower, as alcoholic beverages remain outside GST and continue to be taxed via state excise duties.
Market Outlook
The GST overhaul has created a sector-specific impact. While FMCG staples benefit from lower taxes, carbonated and caffeinated beverages face higher costs. Investors are expected to adjust their portfolios based on these changes, with daily essentials likely attracting more attention.
For consumers, essentials are set to become more affordable, while soft drinks and luxury items may see price adjustments. Analysts say this dual impact will shape consumption patterns in the months ahead and influence sector rotation in the market.
Key Takeaways:
- FMCG staples like Britannia, Colgate, Nestle, HUL gain on lower GST rates for daily essentials.
- Non-alcoholic beverages and caffeinated drinks, including Tata Consumer Products and Varun Beverages, fall due to GST hikes to 40%.
- Alcohol remains outside GST and is taxed via state excise duties.
- Simplification to two GST slabs (5% and 18%) effective September 22 is expected to encourage consumer spending.
PL Capital
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
