Many manufacturers and traders are confused about the effect of GST on the MRP of their products, and how the increase or decrease of the same should be articulated to customers.
According to recently released government regulations, the businesses are required to put up revised prices along with the original prices as stickers on the product within the next three months. If they fail to do so, legal action can be taken against them.
MRP is the maximum retail price. It is the maximum price at which the product can be sold to the customer and it is inclusive of all taxes. According to the Department of Consumer Affairs’ Standards of Weights and Measures (Packaged Commodities) Rules, 1977, “maximum price in relation to any commodity in packaged form shall include all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing forwarding and the like, as the case may be.” Selling at above the MRP is prohibited, though this is a rule that is rarely followed in India.
Under the GST regime, if a price of a product has increased the manufacturer/ importer/ packer will have to give an advertisement in two newspapers about the new MRP and put a revised sticker on the packaging. Both the new and the old MRP must be shown on the packaging.
New MRP should be mentioned on the items where prices have increased due to GST so that the consumers can be aware of the impact of GST.
As for products whose prices have come down under the new tax regime, no newspaper advertisements would need to be published. However, a sticker mentioning the new MRP is mandatory, and the old price should be shown too on the packaging.
Packing material is quite costly so traders can use their existing stock up to September, by just putting a new MRP sticker. Those who don’t comply liable for legal action, three-month dispensation period. The shopkeepers not mentioning MRP revised because of GST will be liable for legal action.
The difference between the retail sale price originally printed on the package and the revised price shall not, in any case, be higher than the extent of increase in tax or in the case of imposition of fresh tax on account of the implementation of the GST.
Relaxation has been granted till 30 September 2017 to the industry under Packaged Commodities Rules to write new MRP on the items of reduced prices due to GST.
The shopkeepers not mentioning MRP revised because of GST will be liable for legal action. The government has announced a three-month period for all manufacturers and traders (till 30 September) so that they can comply with the new rules.