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BeFOrE the government embarked on the process of economic liberalisation in 1991, consumers always dreaded the last day of February, when the Finance Minister presented the Union Budget. In those days, thanks to high rates of taxation, people invariably came up against an all-round increase in the prices of goods, resulting in their having to re-adjust their household budgets. Some of those old advertisements issued by manufacturers exhorting people to buy before the Budget reflect the consumer sentiments of those days. "Just five days left for the Budget. Beat the price rise and buy now," the advertisements would go on. Post 1991 saw an entirely different phase as the government slowly started rationalising the duty structures. As a result, people began to look forward to the Budget with lot of expectations. Unlike the 1980s when they would rush to buy durables just before the Budget, they would hold back their purchases in the hope of paying less after the Budget. This year, however, they were in for an unpleasant surprise — not only did the Union Finance Minister announce a hike in petroleum prices, but also a 2 per cent increase in the prices of manufactured goods (all non-petroleum products). These two increases, coupled with the cascading effect of the hike in fuel prices, would result in an all-round increase in the prices of all goods and even services like road transport and air services. To consumers already reeling under the steep rise in the prices of food commodities, this Budget is expected to bring only more misery. In fact the inflation that the Budget would fuel would completely neutralise the income tax concessions given through widening of tax slabs. Having said that, I must also warn people about the fact that this is the time when manufacturers and retailers are prone to exploit consumer ignorance about tax laws. Where, for example, duties are reduced, there is every possibility of the manufacturer not passing on at all or passing on only partially the benefits of the duty cuts and exemptions to customers. In fact in the past, the government has had to cajole, coax and even threaten the industry on this issue. Yet, several studies have shown how the industry tries to pocket that extra money, thereby denying the benefit of reduced imposts to the public. Where duties are hiked, manufactures will be quick to announce revised prices and fully pass on the duty increases to the people at large. However, what most consumers do not realise is that the increased duty imposts apply only to those goods that leave the manufacturers’ premises after the revised rates become effective, and not on goods that are already in the market or the retailers’ showrooms. However, here, too, there is every possibility of the retailer charging the revised price even on those goods that have not attracted the higher duty imposts and pocketing the extra money. So people need to watch out and ensure that they are not overcharged in the guise of increased charges. In fact when you are buying cars or expensive consumer durables, ask the retailer to show you the invoice that indicates when the goods have left the manufacturers’ premises, and the duty that was paid on it. Only those that have left the manufacturers’ premises from the midnight of February 26 are liable to be taxed at the new rate. As far as other goods are concerned, make sure that the retailer does not put a sticker to obliterate the earlier price and put the higher price on goods in his stock. I must also mention here a case on the subject that came up before the apex court some years ago. Here, the highest court in the country made it clear that a demand or collection of higher excise duty on goods that did not attract that amount constituted an unfair trade practice (Tata Engineering Locomotive Company and Sakti Automobiles vs John Jacob, RP no. 1079 of 1998, decided on April 4, 2006). Here, even though the car had left the factory prior to the increase in excise duty, the consumer had been asked to pay an additional amount of Rs 38,344 at the time of delivery. Expressing its
displeasure at such behaviour, the court directed that the amount be
refunded and also awarded costs of Rs 25,000 to the customer.
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