Maximum Retail Price (MRP)
- Did you face any situation where shopkeeper charged you more than MRP in the name of refrigeration cost, transport cost or sometime even without any reason?
- Is it permissible to charge more than MRP in Hotels or Restaurants?
- Where should one go to lodge complaint if someone charges more than MRP?
These are some of the common situations and questions which everyone must have encountered at one point or the other. Often people don’t ask questions to avoid unnecessary argument and just pay whatever the retailer demands. This gives further encouragement to such retailers. But we would like to emphasize here that it is not about one or two Rupees. It is about right and wrong. It is about your Rights as a citizen and as a consumer. So yIgnore?
Maximum retail price (MRP) means price at which the product shall be sold in retail and which include all taxes levied on the product. The Standards of Weights and Measures Act, 1976, (the Act) mandates that the price be printed on the package whereas the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (the Rules) go impermissibly further by stipulating that price charged cannot exceed the printed price. It is an offence to sell a product at a price higher than MRP.
Difference between the Actual price of goods and the MRP
MRP of the product is inclusive of all taxes and the profit margins of wholesalers and retailers. This includes the local taxes which may vary according to place. Thus at places where local taxes is low, the difference between the selling price and the MRP allows for huge margin and retailer may sell the product for price below the MRP. There are no standard rules governing fixing up of MRP of the product unless it is a ration commodity. Manufacturer can decide the price and MRP has to be printed on the product. No wholesale dealer or retailer shall obliterate, smudge or alter the retail sale price indicated by the manufacturer or the packer or the importer. So even one or two rupee extra charged by retailers citing various excuses like refrigeration cost and transport costs are just ways to fleece the consumers.
Exemption
Exemption from MRP is granted to establishments which are not exactly in retail and are providing services as well. It is permissible to charge extra in hotels, restaurants and aeroplanes because what they are offering is a service. The ambiance and the cooling level at which the drink is offered become part of that service and justifies the prerogative to charge what they want. Supreme Court order (State of Himachal Pradesh v/s Associated Hotels of India, AIR 1972 SC 1131), clarified that MRP is applicable only to retail sales (goods sold in shops).
On the other hand, home delivery service cannot be interpreted on the same lines. In a case filed by Ankit Jain, who was charged Rs.35 for a 500ml Coke bottle (MRP Rs.15 at that time) that he had bought with burgers from Nirula’s in New Delhi, the apex consumer court held that home delivery service cannot be construed as a sale in restaurant where added services are offered. Merely mentioning the higher price clearly in menu wouldn’t give them right to charge extra for home deliveries as it will be treated as retail sale of packaged goods. Also, charging higher than mentioned in the menu is also prohibited and is an offence.
Redressal Mechanism
It is the duty of the respective State government agencies to enforce MRP on retail sellers and is not a matter of concern of the manufacturer/wholesaler. In fact, if you look at the legal metrology websites of various state governments, you will notice that some states like Andhra Pradesh, Kerala and Maharashtra have toll-free helplines and also online complaint facilities. Others like Delhi provides the office address where complaints can be lodged here. Any retailer charging more than MRP is liable to a fine upto Rs. 5000 or a prison term of five years with a fine.
In case a consumer wants compensation, a consumer complaint can be filed in the Consumer Court if excess price (more than what is fixed i.e. MRP) is charged for any goods or services. Unlike the State metrology department, consumer court is empowered to give compensation to the consumers.
The consumer should insist on a valid documentary evidence (cash memo/invoice) relating to purchase of goods or availing of any services and preserve it carefully. Such proof of purchase is required for filing a complaint. In case of durable goods the manufactures generally provide the warranty/guarantee card along with the product. It is the duty of consumers to obtain these documents and ensure that these are duly signed, stamped and dated.
Interesting Case
An interesting case of Mr. Varun Bhalla (complaint number: 383014) against Seven Seas Super Mart Pvt. Ltd. filed in the consumer court. Consumer went to Seven Seas Super Mart Pvt. Ltd., Moga, Punjab as the store had advertised that they charge less than MRP on packaged products. Along with other items, he purchased DOVE Soap of 42 gms. In the cash memo he noticed that the weight of the soap cake is mentioned as 50 gram for Rs. 20/-, and after discount, he was charged Rs. 19/-. He was surprised to see that on the soap packaging the MRP mentioned was Rs. 18/- & weight as 42 gram. By manipulation in cash receipt software, the store was actually charging more than MRP.
The case highlights not just the manipulation by a big retail store which provide cash memo and are rarely a suspect of charging more than MRP but also the case of misleading consumers by a misleading advertisement which is also an offence under the rules given. Apart from the increased awareness of rights the consumer can use certain precautions to avoid being fleeced by retailers. One should always insist on cash memo/receipt of purchase. Do not buy blindly and cross check your purchase and the price and, lastly, beware of false/misleading advertisements.
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Things to watch out before purchasing packed items
Before purchasing any packed item, always watch out for following:
- Name of the item
- Name and complete address of the Manufacturer, Packer and/or importer
- Net contents in terms of weight, volume or number
- M.R.P. (Maximum Retail Price) inclusive of all taxes
- Manufacturing date (month and year).
- Expiry date (if applicable)
- Size and shape of item (only if required)
- Always take the payment receipt
Where the consumer can complain in case he finds any violation of W&M Laws?
You can complain in the Office of Controller of W&M or in the Office of concerned District.
References:
Service Tax at Restaurants
Everyone of you must have noticed all the taxes and miscellaneous charges details which are listed in the bill you get from a restaurant. But, I am sure most of you never bother to find out how they are computing it. It typically includes the following:
- Value Added Tax (VAT)
- Service Charge
- Service Tax
Service charge is collected by individual managements from customers for the services provided. Typically service charges are in the range of 5-12 % in most restaurants, which is payable on the total cost of items consumed without any taxes. Often the front-line staff like waiters who get tips while those employed in the kitchen and others hardly get any. The service charge collected is distributed among all staff, usually after taking into account break-ages and other damages. But, note following two key points:
- It is not illegal to levy the service charge but, if it is there, it should be displayed clearly, especially on the menu.
- Service tax is levied by the government and is payable ONLY on the services provided to the customer.
Service Tax
Several restaurants and hotels are misusing the ignorance of customers and charging them more than the reasonable price. Tricky part here is what comes under service? Service tax can be levied only on the service portion of the bill. In case of restaurants and outdoor catering determination of service portion is given in Rule 2C of the the Service Tax (Determination of Value) Rules, 2006. Following table gives the current rule:
| Business Type | Percentage of total bill under service portion |
|---|---|
| Restaurants | 40 % |
| Outdoor Catering | 60% |
Presently actual service tax which should be charged in a restaurant is 12.36 % of the gross bill i.e. 40% of (service charges + cost of food and beverages excluding VAT). This is equivalent to 4.94% of the total bill ( 12.36 % of 40% of x = 4.94% of x). There are several articles and DHCBA’s notice in this regard, circulating on various social media channels, which are not correct or partially correct.
Here is an example how it should be calculated:
Food and Beverages = Rs. 1000.00
Service Charge @ 10% = Rs. 100.00
Service Tax @ 4.94% = 4.94% of Rs. 1100 = Rs. 54.34 (on F&B + Service Charge)
VAT @14.5% = 14.5% of Rs. 1100 = Rs. 159.50
Total = Rs. 1313.84
Who can charge service tax?
According to rules, only restaurants with air-conditioning in any part or central air-conditioning/heating and/or those with license to serve alcoholic beverages can charge service tax. A/C facility need NOT be available throughout the year. Remember, service tax is chargeable ONLY on the service portion of the bill (which is 40% of total bill @12.36% as per current law).
NOTE:- Service tax should not be charged on sale of food by way of pick-up or home delivery and also goods sold at MRP.
Where to register complaint?
In case of any consumer dispute the person can contact the respective commissionerate for service tax (for ex. http://www.servicetaxdelhi.gov.in/publicgrv.asp) , and from there the activities of the service provider will be inquired into by the commissionerate itself. Else, you can simply register your complaint with us at complaint@yignore.com.
Conclusion: From now on always verify and ask for the right tax calculation and pay only the tax which is supposed to be paid.
References:
What is Consumer?
According to Consumer Protection Act 1986 (India), a ‘consumer’ has been defined as the person who consumes goods (or avails services) for personal use only for a consideration and not for any commercial purpose. However any person who is consuming goods (or availing services) for earning his own living by way of self employment is an exceptional case.
Consumption is an important criterion for defining the term consumer. It should always be after paying (or promising) some consideration. Otherwise such consumption shall be excluded from the definition of consumer. In simple words, consumption of any goods/services without consideration will be treated as gifts and the person shall not be termed as consumer. Consideration should always be in form of some monetary benefit which may be received instantly or promised on a later date. Further the provisions of consumer protection act shall not be attracted where no consideration of any kind is involved.
In the picture above, Akhil and Vicky are consumers but not Rahul because Vicky bought 5 computers to run an internet cafe for earning his living by way of self employment. On the other hand, Rahul is a shopkeeper who bought 20 computers with the sole commercial purpose of selling them.
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yIgnore team thanks for this informative post written by Ms. Ankita Varma (Chartered Accountant).
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