Impact of the 2017 Goods and Services Tax (GST) on Beauty and Personal Care in India
Strategy Briefing
About This Report
Oct 2017The Goods and Services Tax (GST) was implemented in India to make the country a unified common national market. Under GST, all products and services are classified under only four tax slabs nationally, a shift from the earlier scenario of numerous tax brackets in different states. Implementation of GST would result in consumption of some products taking a hit in the short term due to higher GST rates, while consumption of products with comparatively lower GST rates are expected to pick up.
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Impact of the 2017 Goods and Services Tax (GST) on Beauty and Personal Care in India
GST to have multiple benefits for the Indian economy
GST aims to create “One Country One Tax One Market” by removing economic barriers between states. It will eliminate the present complex multi-layered indirect taxation system, making it possible for manufacturers to produce in one state and supply seamlessly across states without barriers.
Price elasticity of pricier discretionary beauty and personal care products higher
Pricier alternatives to necessity products and discretionary products such as body wash/shower gel, facial moisturisers, eye make-up, deodorants pumps, colourants and styling agents which are generally consumed by urban consumers have higher price sensitivity, hence will be impacted by even marginal price hikes due to higher taxes under GST.
Oral care consumption expected to get a boost with lower GST rates
Oral care products such as toothpastes and toothbrushes have been classified as necessity products under GST and tax rate have been fixed at 18% from previous 24%. This move is expected to boost consumption of toothpastes by an additional 1.6 million litres and toothbrush consumption expected to increase by additional 6.5 million units in 2018.
Hair oils offer opportunities for international players to expand and penetrate in the Indian hair care market
Many international players could suffer on the back of GST as they lack presence in the lucrative and now cheaper, hair oils category, where local companies reign. In order to capitalise on lower tax for hair oils, international players could look to tap into the premium segment of this market by targeting urban consumers with oils formulated from sophisticated ingredients.
Opportunity for players to tap into flexible packaging to overcome hike in taxes due to GST
Popularity of sachets within hair care and skin care makes flexible packaging the dominant packaging type for beauty products in India. Among various skin care categories, facial moisturisers is likely to account for over 90% of total flexible packaging in skin care over next five years.
Introduction
Scope
Key findings
GST Mechanism and Background
Implementation of GST in India a long-drawn process
India’s journey for implementing “One Country One Tax One Market”
How GST impacts entire supply chain through to end-consumer
GST structure avoids double taxation, net GST borne by final consumer
GST Impact on Economy
GST to create a unified national market of 1.3 billion consumers
Ease of business: GST to replace 18 existing central and state taxes
GST to have multiple benefits for Indian economy
Foreseeable challenges in successfully implementing GST
Price Elasticity and Retailing Landscape
Price elasticity of discretionary products higher compared to necessity products due to lower income levels
Discretionary spending proportional to income level and affordability
Traditional grocery channel accounts for 50% of beauty sales
India offers diverse channels for shopping beauty products
Price elasticity of pricier discretionary beauty products higher
GST Impact on Beauty and Personal Care
Oral care consumption expected to receive boost from lower GST rates
Bath and shower: Bar soap to register comeback, premium end to be hit
Colour cosmetics: Cheapest brands have the most to lose
Hair care: Cue for international players to innovate in hair oils
GST: Salon business and sales through salons to be impacted
Skin care: Natural, herbal, Ayurvedic trend maybe hit by higher GST rates
Packaging: Opportunity for players to tap into flexible packaging
GST could impact the rising trend of men’s grooming in India
Deodorants strong run in the Indian market expected to continue
Appendix: Impact of GST on Various Beauty and Personal Care Categories
GST impact: Bar soap
GST impact: Body wash/shower gel
GST impact: Talcum powder
GST impact: Deodorant pumps
GST impact: Deodorant sprays
GST impact: Eye make-up
GST impact: Facial make-up
GST impact: Lip products
GST impact: Nail products
GST impact: Colourants
GST impact: Styling agents
GST impact: Conditioners
GST impact: Standard shampoos
GST impact: Men's pre-shave
GST impact: Men's razors and blades
GST impact: Toothbrushes
GST impact: Toothpaste
GST impact: Facial moisturisers
GST impact: Adult Sun Care
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