GST pain: Retailers charge goods and services tax on MRP, complain consumers

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It has been 10 days since the Goods and Services Tax (GST) was rolled out at the stroke of midnight on July 1 but confusion about the indirect tax reform persists while complaints continue to pour in about traders charging GST unfairly.

The consumers are raising their concern through various mechanism the government has floated including its Twitter handle @askGST_GoI and through online community ‘Connected Consumers’ run by Department of Consumer Affairs on social engagement platform LocalCircles.

Many consumers have complained that some retailers are charging the GST over and above the MRP of products. The government has made it clear that the MRP is the maximum price of a product to be sold in retail and charging anything above this is an offence.

One of the consumers shared a bill generated at popular restaurant at Noida in Uttar Pradesh. The invoice was generated two days after the GST was introduced. The restaurant charged central and state GSTs over and above a packet of snacks.

A chemist in Mumbai charged GST on the total MRP of medicines purchased for patient Atul Shah. In this case, the computer generated bill does not show any GST, which was charged and mentioned in ink by the retailer.

This overcharging of GST is not limited to local markets only. Even the online retailers and e-commerce portals are allegedly charging GST over and above MRP.

One of the consumers produced a bill whose invoice was generated on July 4 for a can of edible oil priced at MRP Rs 380. After discount it was priced at Rs 371.43 but then inter-state GST was applied making the edible oil costlier than the MRP.

In yet another case, a consumer reported buying a shirt from a popular e-commerce portal. After 60 per cent discount, the shirt was priced at Rs 720. This is the MRP for the shirt. But, an “estimated GST” of Rs 30.60 was added to it.

In a survey conducted by the LocalCircles, only 23 per cent consumers said that they were being charged only the MRP amount for products.

About 51 per cent complained that they were being charged GST over and above MRP with or without discount. About 20 per cent of over 8,800 participants of the survey said that they got discount on MRP but were charged GST over and above that price.

Interestingly, 26 per cent still had purchases without taking or asking for bills or receipts. The GST reform focuses a lot on invoice generated purchases.

Under the Consumer Goods (Mandatory Printing of Cost of Production and Maximum Retail Price) Act 2006, maximum retail price (MRP) means the price above which a retailer cannot charge his consumers. The MRP already factors in all taxes levied on the product.

A manufacturer is required to mention in clear and bold print the maximum retail price on all the products. A retailer is prohibited under the law to sell at a price higher than the MRP.

In fact, the Consumer Affairs Department has led several campaigns telling consumers to bargain on the MRP as it covers good margin of profit that may range from 10-35 per cent.

There are several laws including the Monopolies and Restrictive Trade Practices Act (MRTP Act), the Essential Commodities Acts and the Consumer Protection Act which make selling a product over and above MRP a punishable offence for unfair trade practice.

Even under the new tax regime, selling a product over and above MRP is a violation of the anti-profiteering clauses of the GST Act. This may lead to cancellation of registration of the retailer.

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