The MRP trap
Govrnment made rules to print MRP on the packets with tax included, in order to safe guard the consumer. But the trade found a way of not only circumventing this, but turning it into a profit churning scheme. Read on for the modus operendi.
Companies print a MRP inclusive of taxes, which is highly inflated compared to the actual selling price of the same packet. The manufacturer and subsequent rung of traders, pay all taxes to the government based on the actual billed value, not MRP. The billed value is much lower than the MRP printed. The happens at each stage of sale. So the government gets only what is due to it . But at all levels and most particularly at the retail level, the inflated MRP printed on the pack, leaves a high margin of bargaining power in selling price. That is why you will find most retailed items selling at lower than printed MRP. People mistakenly think the shopkeeper has given a discount and feel greatly indebted to the shopkeeper. Here the catch is how much is one able to bargain. So the loss is consumers’. Its a double edged sword, you pay more and you also are ingratiated to the shopkeeper for the imaginary discount you got. The only solution to this is to charge all taxes based on the printed MRP minus a 10% fixed presumptive margin of profit. At present the manufacturers do not stand to loose any money by such inflated printing of price, because tax is paid on billed amount. Once MRP is taxed, this menace will end. The question to consider here is that the scope to cheat is built into the MRP scheme itself ! Government attempted to levy central excise based on the printed MRP sometime in the past. But there was stiff opposition from the trade and that had to be shelved. I also know that unless the companies print an inflated MRP on the packets, the retailers do not want to sell that product. That is why you will find certain well known products like Amul, brittania, parle and others not available with the many shops but you will find all kinds of local substandard stuff with inflated prices matching the price of Amul, brittania and parle and the like. Under such circumstances, the consumer settles to buy the substandard but overpriced commodity. Government must reconsider this whole scheme of MRP. It needs to be rejigged and aligned pro the consumer. more
Companies print a MRP inclusive of taxes, which is highly inflated compared to the actual selling price of the same packet. The manufacturer and subsequent rung of traders, pay all taxes to the government based on the actual billed value, not MRP. The billed value is much lower than the MRP printed. The happens at each stage of sale. So the government gets only what is due to it . But at all levels and most particularly at the retail level, the inflated MRP printed on the pack, leaves a high margin of bargaining power in selling price. That is why you will find most retailed items selling at lower than printed MRP. People mistakenly think the shopkeeper has given a discount and feel greatly indebted to the shopkeeper. Here the catch is how much is one able to bargain. So the loss is consumers’. Its a double edged sword, you pay more and you also are ingratiated to the shopkeeper for the imaginary discount you got. The only solution to this is to charge all taxes based on the printed MRP minus a 10% fixed presumptive margin of profit. At present the manufacturers do not stand to loose any money by such inflated printing of price, because tax is paid on billed amount. Once MRP is taxed, this menace will end. The question to consider here is that the scope to cheat is built into the MRP scheme itself ! Government attempted to levy central excise based on the printed MRP sometime in the past. But there was stiff opposition from the trade and that had to be shelved. I also know that unless the companies print an inflated MRP on the packets, the retailers do not want to sell that product. That is why you will find certain well known products like Amul, brittania, parle and others not available with the many shops but you will find all kinds of local substandard stuff with inflated prices matching the price of Amul, brittania and parle and the like. Under such circumstances, the consumer settles to buy the substandard but overpriced commodity. Government must reconsider this whole scheme of MRP. It needs to be rejigged and aligned pro the consumer. more
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The businessmen have utilised in their favour by increasing the cost and putting hidden profit to the retailer. Medicines and essential items are loaded with 40% profit and the shop keeper voluntering in giving 10% discount without asking. Let the government control the Pricing policy before printing MRP. more
Jun 26
I feel that the MRP must be fixed and not negotiable. There is no common justice in individual negotiation. I had a very interesting experience as I went to buy a TV last season. It was Onam and there were discounts and offers everywhere. I liked a TV which was priced above Rs.90000 as MRP. As the retailed felt that I was a genuine purchaser he, with any bargaining, was willing to sell it for around 70000. I felt bad as I had no clue of the actual value of the TV I was going to buy. MRP must be related to the actual manufacturing cost and the negotiation should be within the small margin allowed as profit to the retailer. Government can evolve a mechanism to this effect in the best interest of consumers. more
Jun 17
Most of the packaged commodities and medicines are sold at a discount price for the regular customers. It's ranging from 10 % to 40 %, quite unbelievable. Both manufacturers and retailers must have conscience. Consumers are helpless in this matter and the Government too. more
Jun 15
Reply to Mr.Devinder Sharma. Sorry sir, excise in not paid on MRP.It is always paid on ex-factory price, as excise is a levy on production, whereas VAT is a levy on sale. Excise becomes payable once a product is completed and shifted to the bonded godown as defined under central excise rules OR when removed from the factory gate whichever is before, whether or not the material is actually sold. VAT is payable only when material is actually sold. Therefore the scheme is clear that excise cannot be and is NOT levied on MRP. I have no doubt on this. If excise and VAT were to be lievied on MRP, nobody would ever print inflated MRP on the packs. While filing excise papers, the manufacturer declares what is the discount on MRP to arrive at his ex-factory price and excise is calculated on that discounted price, always. more
Jun 13
I would like to correct you on this issue. The Excise Duty is payable on the basis of printed MRP. However, the VAT is payable on most of the goods based on the actual selling price. In some States even VAT is charged on the printed selling price. The printed price is the maximum selling price and customer can always negociate and buy at lower price. more
Jun 13
