Maximum retail price (MRP) is a manufacturer calculated price that is the highest price that can be charged for a product sold in India and Bangladesh.[1] However, retailers may choose to sell products for less than the MRP. MRP differs from systems using a recommended retail price because in those systems the price calculated by the manufacturer is only a recommendation, not enforceable by law.
Maximum Retail Price = Product’s actual Cost + Profit Margin + CnF margin + Distributor Margin + Retailer Margin + GST + Transportation + other expenses etc.
Definition of M.R.P.: –
As per section 2 (f) of Consumer Goods (mandatory printing of cost of Production and Maximum Retail Price) Act, 2006 M.R.P. is defined as follows
“maximum retail price” means such price at which the product shall be sold in retail and such price shall include all taxes levied on the product.”
As the name itself says Maximum Retail Price (MRP) is the maximum price the seller can charge from the buyer. MRP is inclusive of all taxes including GST.
Also in an official FAQs on Relaxation of Legal Metrology (Packaged Commodities) Rules, 2011 for facilitation of implementation of the provisions of the GST Act and Rules clearly says that “The MRP on a pre-packaged commodity is inclusive of all taxes that can be levied from the consumer, including the GST.”
CV Anand, the state’s civil supplies commissioner and legal metrology department’s controller mentioned that “Customers should be made aware that GST is included in the MRP and it should not be charged separately. Several complaints have come to light of additional GST being charged over MRP on packaged goods, and some non-taxed goods are also been taxed with GST. It is illegal.”
It has been seen to be a misconceived trend among quite a few retailers charge “extra” G.S.T. over and above the M.R.P. arrived at after offering discounts on certain products. However, such a practice is clearly in gross violation of law since M.R.P. is inclusive of all kinds of taxes (including G.S.T.) and no other tax on the said M.R.P is to be levied. Charging G.S.T on the net M.R.P. arrived at after giving the discount on the product, would clearly mean charging and collecting ‘extra G.S.T’ and amount to the legal plunder of “Double Taxation”.
In the judgment of Aero Club (Woodland) vs. Rakesh Sharma wherein the court in similar circumstances held the retailer guilty of Deficiency in Service as well as Unfair Trade Practice since the discount offered does not equal to the one actually received by the consumer and the retailer’s practice amounted to ‘Double Taxation’.
The Revised MRP needs to be declared through stickers / online printing/stamping by satisfying the following conditions –
1. Original MRP should be displayed clearly on the product and the revised MRP should not be overwritten on the original MRP.
2. New MRP will be the exact sum of the old MRP and the tax change and not more. For example, if the old price was Rs 100 and the tax increase due to GST is Rs 10, the new MRP should be rs 110.
3. The person willing to revise the MRP is required to give two advertisements in one or more newspapers and the same needs to be intimated to the Director Legal Metrology and Controllers of Legal Metrology in the states.
4. Manufacturers, however, are not required to publish advertisements in newspapers in case the price of their product/s is reduced due to GST.
Options for consumers if retailers charge more than MRP
If a retailer charges GST over maximum retail price, a consumer can file a complaint against him. A consumer can file a complaint at the ministry or several anti-profiteering commissions set up in India.
The Central Government of India has constituted National Anti-Profiteering Authority to examine whether ITC availed by a registered person or reduction in tax rates have actually resulted in the reduction of prices and whether the same is being passed on to the consumers.
Penalties for charging GST on maximum retail priced product
If a retailer sells products above maximum retail price, then a penalty of Rs.1 lakh or one year of imprisonment is applicable.
Uma Shanti, GST commissionerate, spoke regarding the consumer rights and provoked the consumer to the complaint if shopkeeper asks to pay more over MRP. As she said, “If products are sold at higher prices without following rules, action can be taken against shopkeepers. It includes a penalty of one year in jail or a fine up to Rs. one lakh,”
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