GST-reduced Rates
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Reduced GST rates effective from today

Reduced GST rates effective from today

With the newly reduced GST rates set to start in from Today Wednesday, consumer goods companies have instructed dealers to cut prices of the unsold stock amid concerns that the government may invoke anti-profiteering provisions if they do not slash prices in line with last week’s announcement.

The government is working on allowing changes in pricing of the unsold stock or stock in trade once the new GST rates come into effect, with the revision methodology being worked out expected to be broadly in line with the methodology notified for revision in prices of the unsold stock in July for revision of prices of pre-GST stock, two officials involved in the exercise said. The GST Council, in its 23rd meeting on Friday, had reduced GST rates on over 200 items, including a number of consumer items of daily use.

“After the GST Council’s action against restaurants, FMCG companies fear that the government may apply the anti-profiteering provision to them also if they don’t reduce prices in proportion to the cut in rates announced last week. Companies such as P&G and Marico have asked their dealers to reduce prices and would compensate them for the reduced margins,” an industry source said. Businesses would need to lower the retail price for stock in trade in proportion to the cut in GST rates announced by the GST Council last week, one of the officials cited above said.

Given that the GST Council in its 23rd meeting reduced GST rates on over 200 items, the companies would need to follow only the guideline of revising the prices in the label or sticker of the packaged product and not get advertisements published in newspapers, the officials said. Items for which the GST rate has been cut from 28 %  to 18 % include common use items such as chocolates, chewing gums, detergents, shampoos, hair creams, henna powder, fans, pumps, lamps, sanitary ware, marble and granite. The Council also reduced rates from 18 % to 12 % items such as condensed milk, refined sugar and pasta.

Tax experts said that retailers are free to sell products lower than the maximum retail price (MRP) in general as well, so a change in pricing by way of stickers may not be required ideally, but added to say that the government needs to issue guidelines to act against any act of anti-profiteering.

The GST Council in its 23rd meeting on Friday had reduced GST rates for over 200 items, with 178 items being brought from 28 % tax slab into 18 % category. This, coupled with a GST rate reduction for restaurants to 5 %, is expected to result in a revenue loss of Rs 20,000 crore. The government is now looking at further rationalisation of items in lower tax slabs of 12 % and 18 % under GST.