Hindustan Unilever faces a short-term sales dip due to the GST rate cut transition

The company is expected to report flat to low single-digit consolidated business growth in the September quarter.

“This is a one-off, transitory impact, and we anticipate recovery starting in November, as prices stabilize, underpinned by rising disposable incomes and our ongoing portfolio transformation actions," HUL said in the stock exchange filing, providing a summary of the operating context and its impact on the company’s second-quarter results to be announced on 23 October.

Companies were required to roll out updated prices in the market starting 22 September after the rationalization of GST rates, which reduced prices of a variety of household essentials.

However, for the makers of fast-moving consumer goods (FMCG) that sell hundreds of stock-keeping units across millions of outlets, the transition has proved challenging given the scale of their quarterly business. Meanwhile, retailers stopped taking bulk orders in anticipation of lower rates; companies have also been liquidating inventory to ensure revised prices hit the market as soon as possible.

Transitory impact

HUL reported “transitory" impact in the form of disruption at distributors and retailers clearing existing inventories at old prices.

“While this measure supports long-term consumption, we have seen a transitory impact in the form of disruption at distributors and retailers across channels to clear existing inventories with old prices. This has resulted in the postponement of ordering," it said.

HUL expects this impact to continue well into October, given existing pipeline inventory in the channels.

“Due to the aforesaid context, we expect consolidated business growth to be near flat to low single-digit for the quarter ending 30 September 2025, based on the current view," it said.

The maker of Dove soaps and Surf Excel detergent said approximately 40% of its portfolio—including toilet soap, toothpaste, shampoo, hair oil, talcum powder, lifestyle nutrition, and other foods—now benefits from a reduced GST rate of 5%, down from the previous 12% or 18%.

“The GST reforms are a positive step by the government to drive consumption…HUL remains committed to supporting the government’s efforts by ensuring that the GST benefits are passed on to consumers through competitive pricing and enhanced value across a wide range of products from 22 September onwards."

In the June quarter, HUL’s sales volumes grew 3% after three quarters of slowing growth. Net profit rose 8% to ₹2,732 crore on a 4% sales jump to ₹ ₹15,747 crore.

Last week, rival Godrej Consumer Products Ltd also highlighted the short-term impact of the GST transition.

“I expect to see improvements in volumes going into the festive season, driven both by the direct reduction in GST and the additional disposable income it puts in the hands of consumers. That said, the very short term may be a little complicated," said Sudhir Sitapati, managing director and chief executive, Godrej Consumer Products Ltd, said in a statement.

An estimated 35-40% of its portfolio is impacted by the GST reforms, particularly essentials like soaps and shampoos.