Pre-GST stock will have two MRP tags; FMCG companies worry

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The new guidelines by the Ministry allow companies to print, stamp, or use stickers to show the new MRP on pre-GST product packages.

In a new directive, the Consumer Affairs Ministry provides an alternative to clear off the confusion regarding unsold pre-packaged items lying with manufacturers, retailers and wholesalers. The new guidelines by the Ministry allow companies to print, stamp, or use stickers to show the new MRP on pre-GST product packages. FMCG companies are worried about the impact of this guideline on their sales.

Placing stickers on the products that are already dispatched to stockists, wholesalers or that on the display shelves of retailers could be a daunting task for FMCGs.

Before the rollout of the unified tax, Goods and Services Tax (GST), FMCG companies rushed to clear stock that was unsold and packaged pre-GST. Companies like Colgate, Dabur, HUL offered huge discounts to their wholesalers and retailers to clear old stock.

Products like toothpaste, soap and hair oil that were taxed 22-23% in the previous tax structure are now taxed in the GST slab of 18%. Therefore, the companies were rushing in to dispose of these stocks in the market to avoid two MRPs – a higher pre-GST rate and a lower post-GST rate.

Also, if the companies comply with the government’s new circular they are likely to break the rules laid down by the State government’s, Legal Metrology Department. This department is responsible for regulating the price display on product labels and tampering with them is illegal.

All said this new guideline will deter some FMCG companies from raising prices to absorb the higher tax rates applicable under GST and thereby significantly impact their profitability.

Source : http://www.indiainfoline.com/article/general-editors-choice/gst-pre-gst-stock-will-have-two-mrp-tags-fmcg-companies-worry-117070600133_1.html

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