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GST rate cut: CBEC chairperson asks FMCG companies to 'immediately' update MRP on products

In her letter to all the major FMCG companies, Sarna pointed out the need to immediately revise the maximum retail price on all the products for which the tax reductions have been announced by the GST Council.

BT Online | November 21, 2017 | Updated 15:55 IST
GST rate cut: CBEC chairperson asks FMCG companies to immediately update MRP on products

A week after the GST Council announced major tax cut on over 200 items, Central Board of Excise and Customs or CBEC Chairperson Vanaja Sarna on Monday wrote to FMCG companies, asking them to follow the revised MRP rate list as per the recent tax reduction. In the 23rd GST Council meeting on November 10, as many as 178 items of daily use were moved from the higher tax bracket of 28 per cent to 18 per cent, while a uniform 5 per cent tax was prescribed for all restaurants, both air-conditioned and non-AC. The new GST rates were effective from November 15.

In her letter to all the major Fast-Moving Consumer Goods (FMCG) companies, Sarna pointed out the need to immediately revise the maximum retail price (MRP) on all the products for which the tax reductions have been announced by the GST Council, according a statement by the finance ministry. She has also requested all to give wide publicity to the revised MRP of products. "The government expects that the industry should immediately respond to the earlier appeal made by the Finance Minister on this issue," it said.

GST rates on a number of items have also been reduced from 18 per cent to 12 per cent and from 12 per cent to 5 per cent. "The benefit of reduction in the GST rate has to be passed on by the suppliers to the consumers by way of commensurate reduction in prices. The reduction in GST rates is also expected to encourage domestic demand and investment," the ministry said.

Items on which tax rate has been cut from 28 per cent to 18 per cent include chewing gum, chocolates, coffee, custard powder, marble and granite, dental hygiene products, polishes and creams, sanitary ware, leather clothing, artificial fur, wigs, cookers, stoves, after-shave, deodorant, detergent and washing power, razors and blades, cutlery, storage water heater, batteries, goggles, wrist watches and mattress.

Tax rate on condensed mil, refined sugar, pasta curry paste, diabetic food, medical grade oxygen, printing ink, hand bags, hats, spectacles frame and bamboo/cane furniture has been cut from 18 per cent to 12 per cent. The top tax rate of 28 per cent is now restricted to 50 items, including white goods, cement, paints, luxury and demerit goods like pan masala, aerated water and beverages, cigars and cigarettes, tobacco products.

On Monday, it was reported that the GST Council may extend the tax cut on consumer durables like washing machines and refrigerators from the current level of 28 per cent to 18 per cent in the upcoming meet. The government may take this move to help push demand in the sector.

The industry has been demanding that the taxes on home appliances like washing machines, TVs, refrigerators should be brought down to 18 per cent as these are no longer considered luxury items. Calling for the rate cut, Godrej Appliances EVP and Business Head Kamal Nandi had reportedly said that home appliances have become a necessity and are no longer a luxury.

"We believe that in a market like India, which is a low-penetrated market, slotting appliances under the 18 per cent tax slab will make them more affordable. We have been giving this feedback to the government," the Hindu Business Line quoted him as saying.

Last week, Finance Secretary Hasmukh Adhia had said that FMCG firms and big corporate will have to ensure that retailers pass on the benefit of GST rate cut to consumers and sell their products only after lowering the MRP. When asked what would happen if any retailer does not pass on the benefit despite the corporate reducing the rate, Adhia said the responsibility would rest with the FMCG firm.

"I again want to appeal to FMCG companies that if they want to be safe from anti-profiteering action then they have to ensure that their whole retail chain is informed and immediately pass on the effect of reduction of tax rate from 28 per cent to 18 per cent to consumers," Adhia, who is also the Revenue Secretary, had said.

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