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Effect of Change in rate of tax on MRP

Deepanshu Garg (Student) (251 Points)

28 January 2024

A products MRP is ₹100 with GST rate of 12%.
Now GST rate has been increased to 18% but MRP of the old stock is still ₹100.

Do trader has to take hit on his profit or can we change MRP or charge more than MRP in this situation ? How to deal this situation ?

Thanks & Regards

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16 Replies

sabyasachi mukherjee (26130 Points)
Replied 28 January 2024

Ok possible

1 Like

Deepanshu Garg (Student) (251 Points)
Replied 28 January 2024

@ sabyasachi
Please explain more. Also, if you know of any notification or case study, please share that as well.

1 Like

sabyasachi mukherjee (26130 Points)
Replied 28 January 2024

Certainly send to sabyasachimukherjee7098 @ gmail.com

Yasaswi Gomes new (Finance ) (4486 Points)
Replied 28 January 2024

There is a thing which shows up w.e.f (with effect from) date. So markup 18% on price.

You can also use this opportunity to offer discount. For the inventory procured before the GST change. Eg. Use rate 12% and sell cause it's not clearly mentioned as how prices must change

1 Like

CA Rashmi Gandhi (Chartered Accountant) (86275 Points)
Replied 28 January 2024

Just charge extra 6% on cost

1 Like

Deepanshu Garg (Student) (251 Points)
Replied 28 January 2024

@ CA Rashmi Gandhi

Before rate change I was selling it for ₹100 ie for full MRP.
Now, after rate change how can I sell it above MRP ? How will a customer agree to purchase above MRP ?

Yasaswi Gomes new (Finance ) (4486 Points)
Replied 28 January 2024

Sorry your a student and I didn't notice

100x118/100

Does anyone know if we can sell the old inventory for 12%

1 Like

Deepanshu Garg (Student) (251 Points)
Replied 28 January 2024

@ Yasaswi

Earlier I was collecting ₹100 from customer & paying (100 X 100 ÷ 112) i.e. 10.70 as GST.
Now, I am still collecting ₹100 from customer (as 100 is MRP) but now I have to pay (100 X 100 ÷ 118) i.e. 15.25 as GST.

I am unable to pass the extra GST to customer because of MRP. So, this means I have to bear the burden of extra GST (₹4.55).
So, this extra ₹4.55 I have to pay from my pocket.
This is my concern that due to MRP I am unable to pass the extra GST burden to customer & have to pay it from my own pocket. So, basically I have to forego my profit margin in this case.

How to solve this situation ?

Yasaswi Gomes new (Finance ) (4486 Points)
Replied 28 January 2024

Sorry about that I was thinking about net of sales amount. That amount you can't do anything. You must must budget your product to meet the profit margins. That's why I'm also asking if it is possible to sell finished goods at 12% but label it as 18%?

89.30/- old NSV

84.75/- new NSV

Show 4.55 as discount. But however it's not possible because I guess you'll have 10/- profit on this product. So rebudget your prices immediately

1 Like

Deepanshu Garg (Student) (251 Points)
Replied 28 January 2024

I read somewhere that we can use two MRP's in such cases. This happened when GST was first introduced.
I just want to know if this is true & if there is any such kind of provision ?

Yasaswi Gomes new (Finance ) (4486 Points)
Replied 28 January 2024

Ok got it when prices lowered we can show discount. Not when hiked up. Good luck

Yasaswi Gomes new (Finance ) (4486 Points)
Replied 28 January 2024

https://cleartax.in/s/gst-rate-changes-can-businesses-ca-deal

This article explains how to cope with price changes. It's definetely useful in your situation. If it doesn't help if you don't have accruals, then change your product price

1 Like

sabyasachi mukherjee (26130 Points)
Replied 28 January 2024

Ok after rate change obviously at full mrp

Ar Rahman (46 Points)
Replied 29 January 2024

A change in the rate of tax can impact the Maximum Retail Price (MRP) by either increasing or decreasing the overall cost of the product for consumers. If the tax rate increases, the MRP may go up, and if the tax rate decreases, the MRP might decrease, assuming other factors remain constant. Manufacturers and retailers often adjust prices to reflect changes in tax rates.

1 Like