Impact of GST on MRP of Goods and Services


Date: 28 Jan 2023

Impact of GST on MRP of Goods and Services


Most of India's indirect taxes have been replaced with the Goods and Service Tax (GST). Before implementing the GST, businesses were obligated to pay tax at each stage of the supply chain. The cascading impact causes goods prices to increase. Though, the purchase of raw materials is still eligible for an input tax credit under GST. By doing this, the cascading effect on the product's final price will be reduced.


What Is MRP?

A maximum retail price is printed on every product. Before a product is sold in India, the producers determine the highest price for that particular commodity. Retailers cannot charge customers more than by the MRP.


GST Impact On MRP Of Goods And Services  

The tax rates on various goods have changed quite a bit since the introduction of GST in July 2017. The maximum retail price may therefore increase or decrease. A taxpayer could not always be eligible to collect ITC under GST. In these situations, prices do not decrease. Because of the adoption of GST and ongoing revision of GST rates, It is necessary to adjust the maximum retail price. To pass on the advantages of the reduced GST rate and the ITC advantage, for instance, the prices of FMCG goods have been lowered since the introduction of the GST.


GST Rule For Manufacturers Regarding Change In MRP

A manufacturer must meet the standards below to revise the maximum retail price.

  • Both the original and revised maximum retail price must be disclosed on the products. You shouldn't replace the original with the revised version.

  • The product's net price increase due to tax cannot exceed the increase in maximum retail price. 


For example - The old MRP is Rs. 1000. There is an increase in the tax amount due to a change in GST rate is Rs. 100. New MRP is Rs. 1100 (Cannot surpass this value). Only the manufacturer's stocked item wee needed to appear in the advertising. 


What To Do If a Shop Charges More Than The MRP?  

According to the government, the MRP is the highest price that can be charged for a product at retail. You are not required to spend even a single penny more than an MRP because GST is already incorporated. Selling products beyond MRP is illegal under many statutes, including the Monopolies and Restrictive Trade Practices (MRTP) Act, the Essential Commodities Act, and the Consumer Protection Act. Selling products above MRP also violates the GST regime's anti-profiteering provisions. The GST registration could be cancelled as a result of this. However, retailers can sell at a lower price than the MRP.


The Indian central government established the national anti-profiteering authority to look into whether ITC earned by a registered person or a reduction in tax rates has led to a decrease in costs and whether this has been passed on to consumers. This ensures that the price will remain consistent and that enterprises won't make excessive profits. 


Penalties For Levying GST On MRP Of Goods  

If a retailer sells goods for more than the maximum retail price, they can be penalized with either a 1 lakh fine or 1 year in Jail.