GST rate cut: Companies need to show new rates on old stock also
Consumer durables companies and sanitary napkin makers will have to clearly show new prices even on old stocks lying with their distribution channels after new goods and services tax (GST) rates came into effect from Thursday midnight.
The government will soon issue a directive to this effect.
“A directive will be issued by consumer affairs ministry shortly,” a senior government official said.
Consumer Affairs ministry will issue a directive under the Legal Metrology Act permitting companies to affix pasting or stamping of new prices on old stocks. This order will also apply on importers.
The Goods and Services Tax Council had cut tax rates on a host of white goods to 18% from 28% and exempted sanitary napkins from any tax. Both, the centre and states notified the new rates late evening Thursday.
Companies can change prices on stocks in their possession, but handling prices changes on stocks in transit and that at dealers and retailers is an issue.
As per the directive revised MRP declaration can be by way of stamping or putting sticker or online printing provided original MRP continues to be displayed. Companies will also have to advertise prices changes as also circulate notices to their dealers.
“For stock in hand with companies, it’s easier to do a re-stickering but very difficult for the stock lying across the distribution chain. So long as the manufacturing companies publish a revised price list and communicate to the distributors and retailers, it should be ideally considered as sufficient compliance,” said Pratik Jain, indirect tax leader, PwC.
Experts also said that companies need to communicate to their distributors about change in tax rate asking them to pass it on to consumers .
“As Companies may not have control over the stock held with their distributors and dealers, changing MRP of such goods to pass on the benefit of reduced GST rate, is not possible. In such cases, it is advisable, that the Companies issue proper communication to their dealers apprising them about rate change on their products and requesting them to pass on such benefit to the end consumer,” said Harpreet Singh, partner, KPMG India.
The move is similar to when the GST Council slashed rates for close to 200 products last year in November.
At that time too, it had directed companies to clearly indicate new price tags on existing stocks in the trade pipeline, so that consumers could make out the difference between prices pre and post-GST rate change.
The metrology division enforced that the new MRP be printed on stickers following the cut in GST, relaxing the rule that the new prices needed to be printed directly on the packaging.