Navigating MRP Revisions Following GST Rate Rationalization
- Background
- The Challenge for Businesses
- Official Guidelines for MRP Revision
- Dual Declaration Requirement: The original MRP printed on the package must remain visible. The revised MRP must be declared separately alongside it.
- Price Adjustment Limit: The revised MRP amount must not exceed the net impact of the tax change. This means any reduction in the GST rate must be fully passed on to the consumer in the form of a lower MRP, and any increase can only cover the additional tax burden.
- Mandatory Information Circulation: Companies must widely circulate information about the MRP change through one of the following methods:
- Publishing two advertisements in one or more newspapers.
- Circulating a formal notice to all dealers in their supply chain.
- Sending a notice to the Director of Legal Metrology at the central level and the Controllers of Legal Metrology at the state levels.
- Grace Period for Existing Packaging: To minimize waste, companies are permitted to use any non-exhausted pre-printed packaging material until December 31, 2025, provided the MRP is corrected. This correction can be made using an additional label, sticker, stamping, or online printing.
- Industry Concerns and Potential Risks
- Anti-Profiteering Exposure: The stipulation that the revised MRP must be adjusted strictly to the extent of the tax revision creates a direct obligation to pass on the benefit of any tax reduction. This increases the potential for anti-profiteering investigations if the benefit is not perceived to be passed on correctly.
- Logistical Hurdles at Retail Level: The guidelines lack a clear mechanism for re-labelling unsold inventory that has already been dispatched and is lying with dealers and retailers. This places a significant logistical burden on the distribution network.
- Absence of Prescribed Format: The requirement for newspaper advertisements does not include a government-notified format, leading to potential ambiguity and inconsistency in compliance.
- Recommended Path Forward
Effective September 22, 2025, the Government of India has implemented a rationalization of Goods and Services Tax (GST) rates. This policy change has a direct impact on the Maximum Retail Price (MRP) of pre-packaged commodities, as the MRP is an all-inclusive price under the Legal Metrology Rules.
To provide a framework for compliance, the Legal Metrology Department (under the Ministry of Consumer Affairs, Food and Public Distribution) issued a directive on September 9, 2025. This directive outlines the specific guidelines and compliance requirements for manufacturers, packers, and importers to declare a revised MRP on their unsold inventory due to the GST rate revision.
Businesses holding unsold stock produced or packaged before the GST change face a significant operational challenge. They are obligated to adjust the MRP to reflect the new tax incidence but must do so in a manner that is compliant with regulatory standards and avoids consumer confusion.
The Legal Metrology Department has issued the following clear guidelines for declaring a revised MRP:
While the government's guidelines provide necessary clarity, several practical concerns and risks for businesses have been identified:
To ensure a smooth transition and safeguard industry interests, businesses should consider filing formal representations with the appropriate authorities, such as the Ministry of Consumer Affairs and the GST Council. These representations should seek further clarity on the outlined concerns, particularly regarding the re-labelling process for downstream inventory and a standardized format for public notifications.
Proactive engagement will be crucial in mitigating compliance risks and facilitating an orderly adaptation to the revised GST regime.