GST: Making sense of the changes in the Legal Metrology rules

Manufacturers/packers/ importers of pre-packaged commodity allowed to change retail sale price

Last week the Ministry of Consumer Affairs, Food and Public Distribution amended the Legal Metrology (Packaged Commodities) Rules, 2011. A look at the key changes and what they mean for businesses

Manufacturers/packers/ importers of pre-packaged commodity allowed to declare changed retail sale price due to imposition of the GST

• Unsold stock as on July 1, 2017 for a period of three months (July 1, 2017 to September 30, 2017) allowed to revise retail sale price (RSP) by including the increased amount of tax

• The revised RSP can be made by way of stamping or putting sticker or online printing

• The increase in price cannot be higher than additional tax liability under the GST

• The original RSP and revised RSP need to be printed on the goods

• The manufacturer/packer/importer has to give at least two advertisements in one or more newspapers indicating the change in the price 

• For any reduction in the RSP, a sticker with reduced RSP can be affixed and both original and revised RSP will need to be shown

Impact: There has been an increase in effective rate of tax on transition stock in some cases, particularly products which are liable to be taxed at 28 per cent GST or more. “On these products, earlier VAT was typically payable at 13-14 per cent. Therefore, even if one takes into account a deemed credit of 60 per cent of Central GST of 14 per cent, there was still a loss of around 5-6 per cent,” says Pratik Jain, partner and leader indirect tax, PwC India.

However, in such cases, there could be a requirement of paying additional excise duty or CVD which would have been paid on the basis of earlier maximum retail price, he adds.

Curbing dual MRP

To curb the dual maximum retail price (MRP) issue, a provision has been inserted that no person shall declare different MRPs on an identical pre-packed commodity, irrespective of the profile of the buyer. This comes into effect from January 1, 2018

Impact: The same MRP would be applicable to a product sold in a retail market or to a particular class of buyers. “From a consumer standpoint, it simplifies the matter,” says Jain.

Some key definitions amended in the Rules:

• “Consumer” is now defined as under section 2(1)(d) of the Consumer Protection Act, 1986

• “E-commerce” means buying and selling of goods and services, including digital products, over digital and electronic networks

• “Marketplace based model of e-commerce” means an e-commerce entity providing an information technology platform on a digital and electronic network to act as a facilitator between buyer and seller

Impact: Legal experts say these changes help to do away with differences in definitions among various laws. “These definitions are now in line with what is mentioned in the FDI policy,” said a lawyer. This will help improve compliance for platform-based e-commerce players.