By Disha Rawal
The government, on December 23, extended the deadline given to firms for displaying the post- Goods and Services Tax (GST) prices on pre-packaged products. Consumer Affairs Minister Ram Vilas Paswan announced the extension, citing revision in GST rates in mid-November. Companies have been given time to display the new rates using stickers, online printing or stamping till 31st March 2018.
Need for extension of deadline
The concept of using stickers comes from the need of revising Maximum Retail Price (MRP) for products packaged before the GST rollout. FMCG companies like Dabur and Colgate announced huge pre-GST discounts to liquidate stocks before the rollout. For the rest, the government allowed using stickers to display the post-GST MRP under the Legal Metrology (Packaged Commodities) Rules, 2011 which does not allow tampering with the MRP. Companies had to make the revision until December. In July, Paswan had warned manufacturers that failure to display the revised rates would warrant strict action. The 23rd GST Council meeting held in November necessitated another revision in MRP of products since rates of around 200 products were slashed. Many products of daily usage were shifted from the 28% tax slab to the 23% slab. The council prescribed a uniform 5% rate for all restaurants, both air-conditioned and non-air conditioned. Only about 50 products now remain in the highest 28% taxation slab.
Following this revision, the Confederation of All India Traders (CAIT) led by Prabhav Khandelwal wrote to Paswan demanding an extension in the deadline. CAIT demanded that the rest of the fiscal year be given to liquidate the pre-packaged stocks. FMCG companies also assert that this will ensure that end consumers actually benefit from the reduction.
The way forward
Acting on these demands, the government extended the revision deadline until the end of March 2018. State Metrology Officers were recently directed to ensure that GST cuts are being passed on to consumers by way of new MRP stickers. This move presents another daunting task for companies since new rates have to now be displayed on all stocks with stockists and retailers. This is especially tougher for companies who have already changed the displayed prices. The costs of the exercise may deter companies from modifying prices. This would hurt consumers of these products. The time that companies need to adjust to the new tax system has also increased further. This is important, also because the complex GST system is leading to tax evasion. The collection of taxes dropped by around INR 8,700 crores from September to October this year. Dissatisfaction among traders may also have political ramifications.
Many traders are currently facing roadblocks and glitches in the implementation of the GST. This requires an effective response by the GST Council, especially as many traders are being brought into the formal sector. Yet, the issue of pricing under GST is far from over. The government will reportedly file a review petition in the Supreme Court against an order allowing restaurants and hotels to charge a higher price than the MRP on water. With the prospect of natural gas coming under GST in 2018, many more modifications may take place in the current system. Punitive action against offenders of current regulations also has to take place. However, commentators point out that these problems should be expected when a large economy undergoes a tax reform of this scale.
Featured Image Source: Pexels
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