Govt Eases GST Transition, Allows Use Of Old Packs With Revised Prices

In a major relief for pharmaceutical, FMCG and apparel companies, the government on Tuesday allowed manufacturers to use existing packaging by affixing price stickers to reflect the revised rates. The extension has been permitted until December 31 in a bid to ease transition after the recent GST rate changes and avoid the need of discarding old stock.

"The original MRP shall continue to be displayed, and the revised price shall not overwrite on it," the Ministry of Consumer Affairs, Food and Public Distribution said in a Sept. 9 notification. "Declaration of the changed retail sale price (MRP) shall be made by way of stamping or putting sticker."

Companies are also required to run two newspaper ads to inform consumers of the revised prices, according to the notification.

The move follows representations from industry bodies, which flagged that companies are holding two to three months’ inventory with old pricing and grammage across the supply chain — from factories to retail shelves. They warned that goods worth thousands of crores would become unsellable without permission to use existing packaging. The government’s nod offers significant relief, especially to sellers of apparel and footwear priced above Rs 2,500, where GST has risen from 12% to 18%. In their submissions, the Retailers Association of India and the Clothing Manufacturers Association of India have argued that retailers and brands lack the margins to absorb the higher tax and risked heavy losses if unable to pass on the cost.

"This government decision provides dual benefits, it ensures that consumers are transparently informed of revised prices, and while at the same time, it helps industries avoid the large-scale wastage of packaging material," said Saurabh Agarwal, Tax Partner, EY.

The recent GST overhaul saw steep cuts on most consumer goods, with taxes on butter, cheese, and confectionery reduced to 5% from 12%, and on chocolates, biscuits, cornflakes, coffee, ice-cream, hair oil, soaps and toothpaste to 5% from 18%. The Council also reduced GST on 36 lifesaving drugs and medicines to nil from higher tax slabs. Similarly, the GST on footwear and apparel priced up to Rs 2,500 will now be taxed at 5% and those priced beyond Rs 2,500 will be levied 18%. At present, these items priced up to Rs 1,000 are taxed at 5%. Beyond that, 12% GST is levied.