New MRP Rules under GST notified by Central Government

Maximum Retail Price (“MRP”) is the highest price that can be charged to a consumer by the last point in the supply chain which is inclusive of all taxes. But, post Goods and Services (“GST”) Tax introduced in the country on 1 July 2017, the rate of tax has changed in some commodities, thus, affecting the MRP in some cases. This has created a crisis like situation for several businesses which are left with huge volumes of unsold pre-packed items with the previous MRP before the GST came into force.

By way of respite, the Government has issued a notification on 4 July 2017, allowing companies to print, stamp, or use stickers to show the revised MRP on a product package. The old MRP will have to be clearly visible along with the revised MRP sticker. Also, it has been further directed that companies should advertise the change in prices of their products, in at least two newspapers, if they are raising the price of any product featuring both the new (post-GST) and old (pre-GST) MRPs on the packaging. However, no advertisement is required in case of lowering of price. This step is aimed to ensure that the companies and retailers have a way of dealing with the older (pre-GST) stock and preventing profiteering.

This transitional measure can be availed till 30 September 2017, after which all pre-packed goods will have to have just one MRP including the GST.

That said, this notification has come out as a ‘sticker shock’ to the companies who point out that the step is horrendously complicated, time-consuming and tedious as it would be a formidable task for the manufacturers to use stickers that reflect the new MRP as millions of packages are already in stock with distributors and retailers countrywide. Not only would this be virtually impossible but also, it would impose a crushing financial burden on the sellers.

Also, a downside of the step is that the notification issued would result in non-compliance of the provisions under the Legal Metrology Act, 2009, which prohibits manufacturers from changing MRP tags once goods are out of the factory.

The Food and Consumer Affairs Minister, has taken to social media to inform that if the provisions regarding revised MRP, as stated in the rules, are not properly followed, then legal action will be taken against such shopkeeper.

In conclusion, it would be best to state that though the Government may be well intentioned, the steps being taken are harm handed, and punitive and impractical.