Under GST, affixing new prices on old packing materials onerous task

Moneylife Digital Team 05 July 2017

Economy & Nation

The Indian government has announced goods and services tax (GST)-related rules for maximum retail price (MRP). While companies can continue to use old packaging material till 30 September 2017, the rule requires manufacturers to affix stickers showing the new MRP too. For products where the prices have increased, manufacturers are required to advertise the new MRP in two newspapers. Amidst this regulation and anti-profiteering rules under GST, players may hesitate to undertake price hike, says a research report.

In the note, Edelweiss Securities Ltd, says, "We believe, this regulation should ideally have been introduced with GST rules so that manufacturers would have been better prepared. There would be multiple practical difficulties of affixing stickers with revised MRPs on millions of packages, which are already out in the market. We feel advertising & promotional (A&P) spends will increase for companies where the rates have increased post GST – segments such as skin care products, Ayurvedic products, detergents, malt beverages, lower priced biscuits, and paints."

According to Edelweiss, with the new rules, consumer good and retail are shackled and this will have potentially far-reaching ramifications of regulation. Ram Vilas Paswan, the Minister for Food and Consumer Affairs, has extended a three month dispensation to all manufacturers on old stocks of packed items and packaging material that they are holding. Avinash Srivastav, Secretary of the Department of Consumer Affairs, also stated that packing material is quite costly so traders can use their existing stock up to September 2017, by putting new MRP stickers.

If there is an increase in price, manufacturers have to advertise the same in at least two newspapers before selling the product under the new MRP. In case of price reduction, advertisements are not required. However, the new MRP along with the old one needs to be printed. Legal action will be taken against those who do not comply with these rules – read in conjunction with anti-profiteering rules.

Edelweiss says, "This regulation will have higher impact on companies where the rates have gone up in GST - increased for skin care and Ayurvedic products, detergents, malt beverages, lower priced biscuits and paints. This could lead to jump in costs due to higher A&P spends. Rates have reduced for toothpaste, hair oil and adhesives. Print companies stand to gain from this regulation in short term."

Comments

User

LOKANATH BEELAGI

8 years ago

Sir, one of our customer having 5 loan agreement with us, due delay in repayment, last he paid 2 Installments of each account and total amount Rs. 215000/- whether this amount attracted Section 269ST
PLEASE SIR.

LOKANATH BEELAGI

8 years ago