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GST Rules on MRP priced products

Updated on :  

08 min read.

GST has replaced most of the indirect taxes in India. Under the pre-GST era, businesses were required to pay tax at all the stages of the supply chain. This cascading effect increases the price of the product. But under GST, a taxpayer can claim the input tax credit on raw materials purchase. This reduces the cascading impact on the final price/MRP of the product.

What is MRP or Maximum Retail Price?

Maximum retail price is labelled on every product. It is the highest price determined by the manufacturers for a specific product before the sale in India. Retailers cannot charge customers more than MRP. Maximum retail price printed on a product is inclusive of all taxes.

Explanation to increase or decrease in MRP after GST

Since the implementation of GST from July 2017, there has been a lot of changes in the rates of tax on various products. This results in an increase or decrease in maximum retail price. However under GST, in some cases, a taxpayer cannot claim ITC. In such cases, the prices do not reduce. Due to the imposition of GST and continuous amendment in the GST rates, a need arises to revise the maximum retail price.

For example, post-GST the prices of FMCG products are reduced in order to pass on the benefit of GST rate cut and ITC benefit.

GST rules for a manufacturer to address change in MRP due to GST

A manufacturer is required to comply with the below conditions for revision of maximum retail price.

  1. Both original and revised maximum retail price should be clearly displayed on the product. The revised one should not be overwritten on the original one.
  2. The change in maximum retail price cannot be more than the net price increase of the product because of tax.

For example,

  • Old MRP Rs 100
  • Increase in the tax amount due to rate change – Rs 10
  • New MRP – Cannot be more than Rs 110.

Only the stocked products with the manufacturer were required to put on the advertisement. The new products coming after 1st July 2017 were not covered under the advertisement rule. The advertisement rule is applicable for three months(1st July 2017 to 30th September 2017) of implementation of GST.

Options for consumers if retailers charge more than MRP

If a retailer charges GST over maximum retail price, a consumer can file a complaint against him. A consumer can file a complaint at the ministry or several anti-profiteering commissions set up in India. A retailer cannot charge over MRP. However, a retailer can sell at a price lower than MRP.

The Central Government of India has constituted National Anti-profiteering Authority to examine whether ITC availed by a registered person or reduction in tax rates have actually resulted in the reduction of prices and whether the same is being passed on to the consumers. This ensures that the prices remain under check and businesses do not pocket excess gains.

Penalties for charging GST on maximum retail priced product

If a retailer sells products above maximum retail price, then a penalty of Rs.1 lakh or one year of imprisonment is applicable.

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