Packaged food company Nestlé said it would pass on to consumers any reduction in tax rates due to the introduction of the goods and services tax tomorrow.
Companies are not obliged to pass on the benefit of lower taxes to consumers, and many are unlikely to. The Swiss giant said it won’t be one of them.
“Categories where we have a reduction in taxes, commensurate benefits will be passed on to the consumers,” the Indian unit of the Switzerland-based company said. “There has been considerable reduction in GST rate on milk powders and consequently the price of Nestle Everyday Whitener is expected to undergo commensurate reduction.”
India will move from a combination of multiple taxes such as municipal tax, excise, state service tax, central service tax, sales tax, entertainment tax and so on into a single levy called Goods and Services Tax tonight.
Food, in fact, ranks as the single product category that will have the biggest decrease in tax rate under the new regime.
The tax on food was at 12.5% before, and will fall to 5% after the introduction of GST. Similarly, household items such as soaps and toiletries will see a decline in tax rate from 28% to 18%.
Nestle said it welcomed the new tax regime.
“GST will significantly enhance the ease of doing business across India through reduction in multiplicity of taxes, simpler tax regime and fewer rates…We believe that over time, this will unleash economies of scale and economies of efficiencies that can be quite significant,” the company said.
The company has trained over 3,500 suppliers and over 1,600 distributors on the new regime, it said.