Govt warns retailers against profiteering on GST transition

Niggling problems in the transition to the Goods & Services Tax regime continued to crop up even on the fourth day after the tax reform measure was ushered in, despite the government’s elaborate preparations to avert technical glitches.

On Tuesday, Revenue Secretary Hasmukh Adhia and his team found themselves dealing with concerns over the unsold inventory of the FMCG and consumer durables players. Parallelly, the Consumer Affairs Ministry also warned retailers against profiteering.

The Consumer Affairs Ministry wanted to know what would happen to unsold inventory and at what price they would be sold.

Aadhia said companies would have three months’ time — till September 30 — to sell the unsold inventory. But, he added, they would have to affix an additional sticker to reflect any price change. After September 30, they will have to affix fresh stickers reflecting the GST rate.

“The benefits of decreased prices, by reduction of tax after imposition of GST, should reach the consumers,” said Ram Vilas Paswan, Minister of Food and Public Distribution, Consumer Affairs, adding that shopkeepers who do not mention the revised retail price will be liable for legal action.

“For any increase in price due to GST, manufacturers and retailers can sell goods manufactured before July 1 at the higher price, along with two advertisements in the local newspaper about the price rise, and a sticker on the product with the higher price. The earlier price should also be visible,” said Consumer Affairs Secretary Avinash Srivastava.

An official notification warned that the difference between the retail sale price originally printed on the package and the revised price “shall not, in any case, be higher than the extent of increase in tax” or in the case of imposition of fresh tax on account of the implementation of the GST.

The move comes at a time when the government is in the process of setting up an anti-profiteering authority to curb any unwarranted price rise after the new levy.

Lalit Agarwal, CMD, V-Mart Retail, said, that it will take a few weeks for the entire supply chain eco-system to transition to GST, and new stocks with new packaging and new printed MRPs to come to retailers.

“Even as the FMCG companies have transitioned to GST, their distributors, supply chain vendors and the logistics players are still in the process of making a transition to GST and hence it will take time before new stocks come to retailers. We are liquidating the current stock at the same MRP and bearing the differential losses,” he added.

Most large FMCG companies have said that they will make appropriate price reductions in categories where the tax incidence has come down.

FMCG companies are also learnt to have made preparations for disruptions in raw material supplies as vendors are still in the process of making the transition. A senior executive associated with the beverages industry added, “We depend on both small and big retailers for our sales. We feel any changes in price will adversely impact them. Hence, no changes have been made immediately.”

Stressing that the government is keeping a close watch on prices and supply of goods after the rollout of GST, Adhia said that there have been no reports of any disruptions.

Clarifying doubts about GST, Adhia said small traders falling below the threshold or those opting for the composition scheme are not required to issue bills with the tax break-up.

Larger businesses with an annual turnover of over ₹75 lakh will have to issue bills, but they do not have to give computer-generated bills, he said.

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