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5
July 2017
 |
GST (The Total Investment & Insurance Solutions)
The Indian
government has announced goods and services tax (GST)-related rules for maximum
retail price (MRP). While companies can continue to use old packaging material
till 30 September 2017, the rule requires manufacturers to affix stickers
showing the new MRP too. For products where the prices have increased,
manufacturers are required to advertise the new MRP in two newspapers. Amidst
this regulation and anti-profiteering rules under GST, players may hesitate to
undertake price hike, says a research report. The Total Investment & Insurance Solutions
In the note,
Edelweiss Securities Ltd, says, "We believe, this regulation should
ideally have been introduced with GST rules so that manufacturers would have
been better prepared. There would be multiple practical difficulties of
affixing stickers with revised MRPs on millions of packages, which are already
out in the market. We feel advertising & promotional (A&P) spends will
increase for companies where the rates have increased post GST – segments such
as skin care products, Ayurvedic products, detergents, malt beverages, lower
priced biscuits, and paints."
According to
Edelweiss, with the new rules, consumer good and retail are shackled and this
will have potentially far-reaching ramifications of regulation. Ram Vilas
Paswan, the Minister for Food and Consumer Affairs, has extended a three month
dispensation to all manufacturers on old stocks of packed items and packaging
material that they are holding. Avinash Srivastav, Secretary of the Department
of Consumer Affairs, also stated that packing material is quite costly so
traders can use their existing stock up to September 2017, by putting new MRP
stickers. The Total Investment &
Insurance Solutions
If there is
an increase in price, manufacturers have to advertise the same in at least two
newspapers before selling the product under the new MRP. In case of price
reduction, advertisements are not required. However, the new MRP along with the
old one needs to be printed. Legal action will be taken against those who do
not comply with these rules – read in conjunction with anti-profiteering rules.
Edelweiss
says, "This regulation will have higher impact on companies where the
rates have gone up in GST - increased for skin care and Ayurvedic products,
detergents, malt beverages, lower priced biscuits and paints. This could lead
to jump in costs due to higher A&P spends. Rates have reduced for
toothpaste, hair oil and adhesives. Print companies stand to gain from this
regulation in short term."The
Total Investment & Insurance Solutions
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