Increase in grammage, instead of a price cut, following GST rate reduction may not lead to flouting of anti-profiteering clauses. However, the benefits of such changes have to be passed on to consumers at a stock-keeping unit level, BN Sharma, Chairman of the National Anti-Profiteering Authority (NAA), said.

Stock-keeping units are individual packages of either the same or different products. For example, hair oils can come in a 10 ml pack or a 100 ml bottle, but despite being the same product they will considered as two units.

Although the law mandates that companies have to cut prices on goods following a reduction in rates, companies have quite often chosen to increase grammage, as an alternative.

“The increase (in volume) has to be proportionate to the benefit arising of the tax rate cut; there should be a time element in it. For example, if the GST rate is reduced in January and the company increases the grammage in April,” Sharma said speaking at an interactive session organised by the Merchants’ Chamber of Commerce and Industry here on Friday.

Companies, irrespective of whether they are making a profit or loss, cannot claim to have passed on GST benefits by reducing prices of select products. However, he clarified that the NAA is not a price regulator and companies can increase product prices too if required.

Related Topics