The honeymoon period for Indian FMCG companies may soon be nearing its end. The government is considering ending the tax holiday for manufacturing units located in Himachal Pradesh and Uttaranchal this fiscal. The move to pre-pone the earlier deadline of FY13 is to have a uniform goods and services tax (GST) regime.
Many FMCG companies had set up manufacturing unit in these areas to take advantage of the tax sops. According to estimates, the higher effective taxes will scale up costs for these companies by upto 30% from current levels. An increase of this magnitude would put pressure on these companies to increase their prices. The cascading effect of this will be a slowdown in sales and an impact on margins.
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