Goods and Service Tax

A Complete Analysis of GST on MRP Products

calendar06 Jun, 2023
timeReading Time: 4 Minutes
A Complete Analysis of GST on MRP Products

Prior to GST, there were a lot of taxes, and different states charged different taxes. Now, after July 1, 2017, which was the date when GST was brought into effect, the concept of ‘one nation, one tax’ was implemented in the whole country. Moreover, GST includes all the indirect taxes, and there is now a bar on all organisations and states that they cannot charge any other tax on the customers when GST is levied. GST is the goods and services tax. Still, there is confusion between the manufacturers and the traders about whether the GST shall be charged on MRP. In order to understand the calculation of GST, it is crucial to determine the meaning of MRP. Let’s delve deep into the topic and understand the concept of MRP and how the GST is calculated. In this article, we will discuss more about GST on MRP products.

Understanding the concept of MRP

MRP[1] stands for the Maximum Retail Price that is mentioned on every product. As the name suggests, any manufacturer or retailer is not allowed to sell any product beyond the MRP mentioned on the product. Consumer Goods Act of 2006 makes a provision for the retailer or seller which states that they cannot sell any products to the consumers beyond the price mentioned on the product as MRP.

The real pricing of a number of goods and services has changed since the GST was imposed. The government modified the MRP guidelines for manufacturers and retailers in addition to modifying the GST rates.

MRP Guidelines after the Implementation of GST – GST on MRP Products

As and when the GST rates are modified, the MRP shall also be changed as per the GST rates. This means that when the new GST rates are introduced, and a few are left unsold, the price of all those products must be changed. The manufacturer or retailer is then required to stick and stamp the new rates on the products that will be used for further selling the product. Moreover, while altering the GST rates, the following points shall be kept in mind:

  • The original MRP mentioned on the product must be transparent so that it is easily visible. Furthermore, the changed MRP shall not replace the actual MRP.
  • The difference between the original MRP and the updated MRP cannot exceed the net price increase after accounting for the surplus availability of ITC and the tax incidence, according to Section 140(3) of the CGST Act, 2017. It’s vital to keep in mind that he believed dealers might receive credit.
  • Any manufacturer or retailer who wishes to change the price of their product is required to give two ads in at least one newspaper.           Furthermore, they are also required to provide information regarding the change in price to the Controllers and Director of Legal Metrology in every state.
  • It is not the duty of manufacturers to inform the newspapers in case the GST rates reduce after it has been put in place.

In all circumstances, the manufacturer shall place the new and old MRP sticker on the product. 

GST On MRP Products

Concerning the MRP of items under the GST, Avinash K. Srivastava, Secretary of the Department of Consumer Affairs, provided answers. He was quite explicit that every manufacturer and distributor had to publish the whole information from both the original MRP and the amended MRP on the goods. He added that a second notification would be sent out in the event of a price hike, and the product packaging would include both prices.

In addition, whereas other participants in the plan must demonstrate how expenses are allocated, dealers who are a member of the GST Composition plan are exempt from this requirement. Vehicles crossing state boundaries will still be required to pay because there isn’t currently a cess on goods unless they hold a national licence. Checkpoints have been eliminated in 22 states thus far. Instead of the products being transported, cars are parked around the borders of crossings. Therefore, that should be paid.

A Central Monitoring Committee was established to examine product price and supply once GST was put into effect. Dr. Hasmukh Adhia, the Revenue Secretary, stated at a news conference in Delhi that a committee made up of 15 secretaries from departments that work directly with consumers had been established to monitor commodities prices and clientele. The Link officer will assist officials in monitoring four to five districts even if no field work is involved.

The transaction value, or the actual cost paid for an item or service, is the basis for assessing the GST. A supply’s value under GST includes all taxes, charges, tariffs, and other costs imposed by any legislation.

Calculation of MRP and GST

Here is the calculation process of MRP, and we will also see how the GST is calculated on the MRP:

The formula for the calculation of MRP:

Maximum Retail Price = Manufacturing Cost + CnF Margin + Packaging/Presentation Cost + Stockist Margin + Profit Margin + Stockist Margin + GST + Shipping + Retailer Margin + Marketing/Advertising Costs + Other Costs.

  • The sellers are not allowed to sell any product beyond the MRP.
  • According to the Central Board of Excise and Customs (CBEC) rules, if any retailer sells any product more than the MRP, then the customer’s can bring a lawsuit against the seller or the store. Moreover, the complaint can be filed either with the ministry or any anti-profiteering commissions.
  • Any seller cannot sell the products for more than the MRP rates, the reason being that the MRP is inclusive of the taxes. Although the manufacturers can sell for less than the MRP rate or are allowed to give discounts to the customers on MSRP for certain things but, MRP being the maximum price, no one can sell for more than that price.
  • The seller who is imposing GST on the MRP may encounter legal consequences.
  • Any retailer or manufacturer selling products for more than MRP may be imprisoned for one year or a fine of Rs 1 lakh.

Conclusion

A product’s Maximum Retail Price (MRP) is the highest price that the manufacturer may determine and demand for it to be sold in India. Retailers are permitted to sell the products for less than the MRP but not for more than the MRP. Customers can protest to the retailer if he adds GST to the MRP. Additionally, the vendor would be subject to the severe penalties mentioned above if proven guilty. If you have any inquiries concerning the GST on MRP items, contact Corpbiz and get answers to all your questions.

Read Our Article: The Impact Of GST On Pre-Packaged Commodities

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