Revisions in Goods and Services Tax (GST) rates open up new opportunities for businesses to realign with the evolving economy. While these adjustments are meant to streamline the economy, they often leave manufacturers, packers, and importers with a significant challenge: what to do with unsold stock that already has a Maximum Retail Price (MRP) printed on it? Selling at the old price could lead to losses or incorrect tax collection, but changing it requires following a strict set of rules.
If you're holding unsold inventory after a GST rate adjustment, you need a clear action plan. This guide provides a straightforward breakdown of the official rules for MRP revision on unsold stock. We'll cover who the rules apply to, the specific conditions you must meet, and the deadlines you need to be aware of to ensure your business remains compliant and avoids legal issues.
Who can revise the MRP on unsold stock?
The first step is to understand if these rules apply to your business. The provision for revising the MRP on existing inventory is not for everyone. It is specifically available for businesses at the beginning of the supply chain.
The rules for MRP revision on unsold stock apply exclusively to:
- Manufacturers
- Packers
- Importers
Retailers are not permitted to change the MRP on the products they have in their stores. The responsibility and the permission to make these changes lie solely with the businesses that package and bring the products to market.
How long do you have to revise the MRP?
Timing is critical. The government provides a specific window for businesses to clear their unsold stock with revised prices. This ensures a smooth transition without causing long-term market disruption.
The permission to sell unsold stock with a revised MRP is valid until December 31, 2025, or until the date the stock is exhausted, whichever comes earlier. This deadline gives businesses a practical timeframe to manage their inventory and ensure all products reflect the correct pricing according to the updated GST rates.
Conditions for revising MRP: A step-by-step guide
Simply deciding to change the price isn't enough. The government has laid out precise conditions to protect consumers and maintain transparency. Failure to follow these steps can result in penalties.
1. Clearly display both old and New Prices
Transparency is the most important rule. When you revise the price on a product, you cannot simply hide the old MRP. Consumers must be able to see the original price to understand the change.
- How to display: You can affix the new price using a sticker, stamp, or by printing it directly on the package.
- Crucial requirement: The original MRP must remain clearly visible on the package. You cannot scratch it out, cover it with an opaque sticker, or otherwise obscure it.
This dual-price display assures customers that the price change is legitimate and directly related to the tax adjustment.
2. No overcharging allowed
The purpose of allowing MRP revision is to account for a change in the tax component, not to increase profit margins under the guise of a GST update.
- If GST rates increase: The MRP can be revised upwards only by an amount that reflects the increased tax burden. For example, if a GST rate change adds ₹5 in tax to a product, the MRP can increase by no more than ₹5.
- If GST rates decrease: It is mandatory to pass the benefit of the tax reduction on to the consumer. The MRP must be revised downwards to reflect the lower tax amount.
Any attempt to increase the price beyond the GST rate change is considered overcharging and is illegal.
3. Advertise the MRP change
To ensure widespread public awareness, you must inform consumers about the MRP revision through public advertisements. This is a mandatory step that cannot be skipped.
- Advertising requirement: You must publish a minimum of two advertisements in newspapers.
- Newspaper selection: The ads should be placed in one national daily newspaper and one local newspaper from the area where the stock is being sold.
These advertisements should clearly state which products are undergoing a price change and explain that the revision is due to the GST rate adjustment. This helps build consumer trust and demonstrates your commitment to transparency.
4. Use existing packaging materials
The government understands that businesses often have large quantities of pre-printed packaging materials. Discarding them would be wasteful and costly.
- The provision: You are permitted to use your existing packaging and wrapping materials until December 31, 2025.
- How to comply: During this period, you can use stickers or online printing to declare the revised MRP on your old packaging, as long as you follow all the other conditions mentioned above.
This rule provides financial relief and prevents unnecessary waste, allowing for a more sustainable transition to new packaging.
Why following these rules is crucial
Adhering to these guidelines is not just about avoiding fines; it's about maintaining your brand's integrity. Transparent pricing and clear communication build consumer trust, which is invaluable. By following the rules, you show customers that you are a responsible and ethical business.
Furthermore, proper compliance protects you from legal action under consumer protection laws. The authorities actively monitor for overcharging and non-compliance, and the penalties can be severe. Taking the time to follow these simple steps is a small investment that protects your business in the long run.
Key takeaways
Navigating a GST rate change can be complex, but revising the MRP on your unsold stock doesn't have to be. Here are the actionable steps to remember:
- Confirm applicability: The rules apply only if you are a manufacturer, packer, or importer.
- Act within the timeline: Revise and clear your unsold stock before December 31, 2025.
- Ensure price visibility: Use a sticker or stamp for the new MRP but keep the original MRP clearly visible.
- Price fairly: Adjust the MRP only to the extent of the GST rate change. Pass on any tax cuts to consumers.
- Advertise publicly: Place at least two newspaper ads to inform the public of the price revision.
- Use old packaging: You can use existing packaging materials until the end of 2025 by applying the revised MRP correctly.
By following this guide, you can manage your unsold inventory effectively, stay compliant with the law, and maintain a positive relationship with your customers.
