The Centre on Tuesday permitted manufacturers, packers and importers of pre-packaged goods to revise the maximum retail price (MRP) on unsold stocks until December 31, 2025, providing much-needed relief to fast-moving consumer goods (FMCG) companies.
Firms can now print revised MRP on unsold stock from September 22, when the GST 2.0 will be rolled out, by way of stamping, putting a sticker or online printing, as the case may be, the department of consumer affairs said in a notification on Tuesday.
The decision followed repeated appeals by FMCG companies that they be allowed to clear inventories with pre-printed MRPs at discounted rates once the revised GST structure comes into effect. Industry players had warned that packaging material worth over Rs 2,000 crore could go to waste if this relief was not provided.
Transparency in revised pricing
The changes in packaging have been necessitated as the GST Council revised tax rates last week on many FMCG products in a bid to boost consumption and consolidate the existing rate structure into two slabs, 5% and 18%. This had meant changes in prices on packaged goods already produced, creating a supply-chain challenge for companies.
“The original MRP must continue to be displayed, and the new price cannot overwrite it. The difference between the old and revised price should only reflect the actual increase or reduction in tax due to GST changes,” the notification said.
Companies can declare a revised MRP until December 31, 2025 or until the old stock is cleared, whichever is earlier, the notification stated.
In letters sent via industry bodies to the finance ministry and the department of consumer affairs, companies pointed out that they typically hold two-to-three months’ inventory across the supply chain, covering millions of items.
Passing GST benefits to consumers
“Majority of the packaging materials are pre-printed with the prevailing MRP. In order to avoid colossal waste, manufacturers should be allowed to exhaust pre-printed material with existing MRP,” one letter read.
FMCG executives say that the latest measures by the government are welcome. “FMCG firms including us intend to pass on the full tax cut benefits through lower pricing,” Mohit Malhotra, CEO, Dabur India, said. “We are working how best to do it without wastage,” he said.
Firms such as Amul and Parle Products have said that they will use advertisements and discounts to reflect the new prices on old stock.
Tax experts say that companies have been asked to have at least two advertisements in one or more newspapers to indicate price changes and also circulate notices to dealers, the director of legal metrology in the central government and controllers of legal metrology in states and Union territories.
“This measure provides dual benefits. First, it ensures that consumers are transparently informed of revised prices. The second is that industries can avoid large-scale wastage of packaging material,” Saurabh Agarwal, tax partner, EY, said.
Industry associations have also sought re-introduction of rounding off MRPs to the nearest rupee or 50 paise for billing simplicity, and recognition of promotional offers such as “buy one-get one” schemes or increased grammage as valid ways of passing on GST benefits, industry sources said.
Companies are expected to leverage the GST changes through value-driven offers, smaller pack sizes and targeted outreach in rural areas.