The new GST (Good and Service Tax) rates officially effected from the midnight of 26 July 2018, after a recent reduction in the GST rates of consumer durables and sanitary napkins.
According to a government official, companies selling these products are required to show new rates on their new as well as existing stocks. A directive to this order will be soon released by the government.
This creates a problem for the companies that are involved in the sale of consumer durables and have stocks lying with their dealers and retailers. It is still possible to change prices of products that are in companies’ possession, but updating new prices on stocks that are already in transit or received by dealers/retailers is going to be an issue.
Harpreet Singh, partner, KPMG India, said, “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 a 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.”
The directive permitting the companies, including importers, to affix new prices on old stocks will be shortly issued by Consumer Affairs Ministry under the Legal Metrology Act.
As per the directive, companies can declare revised MRP by way of online printing, stamping or by putting stickers along with the original MRP of the product. Companies are also required to notify their dealers and distributors about prices changes and ask them to sell the goods at new prices only.
During the 28th Meeting of the GST Council, it was decided to decrease tax rates on a number of white goods from 28% to 18% and completely remove the tax from sanitary napkins. The new rates were released to the public by the Centre and states on Thursday evening.
Pratik Jain, indirect tax leader, PwC, said, “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.”
The new prices along with the old MRP must be printed on packaging and stickers after the recent GST cut, according to the metrology division.
