GST rejig: Govt permits MRP revision of unsold FMCG stocks till December 31
The rejig of GST rates have put many companies face to face with a challenge -- how to exhaust the inventory and packaging material before September 22, when the new indirect tax rates are supposed to kick in.
Kolkata: The government has responded to urges by a section of consumer companies and allowed manufacturers, packers and importers of pre-packaged commodities to revise the MRP (maximum retail price) on inventory till the end of this calendar year. The move is supposed to end one of the challenges faced by many companies following the decision by the government to revise GST rates downwards for a huge number of items.
The notification came against the backdrop of consumer goods companies seeking extension of the September 22 timeline for GST rates to kick in, arguing that it will be almost impossible to manage current inventory according to the extant indirect tax structure. The point was to exhaust the existing inventory and packaging material. Reports said that FMCG companies wrote to both the Department of Consumer Affairs and Finance Ministry with the plea. They also asked the government whether they can increase the amount of the net quantity delivered and compensate for the lower taxes ie, lower price.
The logistical nightmare arose from the need to revise the MRP of almost all items on retail shelves since the price of more than 90% of the items were revised downwards by the rate revision. While the GST rates are now 5%, 12%, 18% and 28%, the rates applicable from September 22 will be mainly 5% and 18% while a handful of items have been sent to a new 40% slab reserved for sin goods such as tobacco and carbonated drinks.
The Department of Consumer Affairs issued a notification stating that companies can declare the revised MRP until the last day of December or till the old stocks are sold, whichever happens earlier. They can declare the new MRP by stamping packages or printing them online or putting stickers on the packs. But there is a rider -- the old MRP has to be visible on the pack. It needs no mention that this step will make it possible for the consumer to see that rise or fall in price due to the change in indirect taxation. Manufacturers, packers or importers also have to publish a minimum of two advertisements in newspapers and issue notices to dealers.
The order means that existing packaging material displaying the current rates can still be used till the end of this year. However, it does not mean that the cpnsumers have to pay the old rates.
The central objective of the GST rejig is to simplify the indirect taxation structure, registration and compliance procedures to expand the tax net on the one hand and raise consumption through lower price levels to boost revenues on the other.