Good explanation of profiteering...
Since the goods and services tax (GST) was introduced in India, the GST Council has reduced tax rates on many items over time to make sure the household costs of consumers come down. In different discussions on LocalCircles, which hosts an anti-profiteering online community for National Anti-profiteering Authority (NAA), several consumers have been reporting that even after the GST rate reduction, many manufacturers as well as retailers have not been passing on the benefits. For instance, though GST rates on regular household items like shampoos, cosmetics, groceries, etc. were reduced from 28% to 18% in November 2017, only 27% consumers confirmed in the January 2019 LocalCircles survey that they have actually seen maximum retail prices (MRPs) being revised downwards. Similarly, for items like appliances, fragrances, paints, etc., where GST rates were reduced in July 2018, only 26% consumers have confirmed experiencing lower MRPs while 38% confirmed that MRPs had not been reduced, 36% didn’t know or did not have a need to buy such items.
Now, consumers can easily submit a complaint with evidence of old and new MRPs to outline instances of profiteering. It can be an invoice, a screenshot of product listing with MRP from an e-commerce site or a picture of the actual product. In cases of restaurants, one can submit invoices or even pictures of the old and new menu cards, which many times have a date on them. Once the complaint is received via the anti-profiteering online community or the NAA complaint form, it is forwarded to the Standing Committee within 24 hours and is taken for evaluation. The entire process of evaluation, investigation, hearing and order currently takes anywhere between 9-12 months from the time a complaint is registered.
Based on complaints received, it is apparent that majority of the brands have not tended to revise MRPs on existing stocks at their warehouse and at the distributor or retailer level so till these stocks are depleted, the consumers don’t actually experience the benefit. Same is the case with e-commerce, where in many cases, the sellers are still listing products with the old and higher MRPs. When a consumer submits a complaint, not only is that particular SKU (stock keeping unit) questioned but many times the entire product category is evaluated for profiteering.
What is required here is that the manufacturers or the brands take a proactive approach to passing on GST benefits and a supply chain communication mechanism is implemented which is electronic and fast, so different players in the chain know the price revision by SKU and understand that these benefits are to be passed now, rather than when they get the new stock with updated MRPs. In some cases, the brands may even have to issue credit vouchers to retailers to compensate them for selling the stock at a lower price than the MRP.
The math of profiteering is rather simple, where once a GST rate is reduced, the base price for an item is calculated from the old MRP and the new GST rate is applied to the base price to derive the expected MRP. The difference between the brand’s new MRP and the expected MRP is what classifies as profiteering.
https://www.livemint.com/politics/policy/brands-must-take-a-proactive-approach-to-pass-on-gst-benefits-1551808808899.html more
Now, consumers can easily submit a complaint with evidence of old and new MRPs to outline instances of profiteering. It can be an invoice, a screenshot of product listing with MRP from an e-commerce site or a picture of the actual product. In cases of restaurants, one can submit invoices or even pictures of the old and new menu cards, which many times have a date on them. Once the complaint is received via the anti-profiteering online community or the NAA complaint form, it is forwarded to the Standing Committee within 24 hours and is taken for evaluation. The entire process of evaluation, investigation, hearing and order currently takes anywhere between 9-12 months from the time a complaint is registered.
Based on complaints received, it is apparent that majority of the brands have not tended to revise MRPs on existing stocks at their warehouse and at the distributor or retailer level so till these stocks are depleted, the consumers don’t actually experience the benefit. Same is the case with e-commerce, where in many cases, the sellers are still listing products with the old and higher MRPs. When a consumer submits a complaint, not only is that particular SKU (stock keeping unit) questioned but many times the entire product category is evaluated for profiteering.
What is required here is that the manufacturers or the brands take a proactive approach to passing on GST benefits and a supply chain communication mechanism is implemented which is electronic and fast, so different players in the chain know the price revision by SKU and understand that these benefits are to be passed now, rather than when they get the new stock with updated MRPs. In some cases, the brands may even have to issue credit vouchers to retailers to compensate them for selling the stock at a lower price than the MRP.
The math of profiteering is rather simple, where once a GST rate is reduced, the base price for an item is calculated from the old MRP and the new GST rate is applied to the base price to derive the expected MRP. The difference between the brand’s new MRP and the expected MRP is what classifies as profiteering.
https://www.livemint.com/politics/policy/brands-must-take-a-proactive-approach-to-pass-on-gst-benefits-1551808808899.html more
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