Is Maggi really going to be expensive? This will happen because of Switzerland

Maggi is liked in almost every house in India. These noodles, which can be prepared in two minutes, have now become a part of people’s lives. Especially the lives of children and bachelors. However, now Maggi may become expensive. The biggest thing is that behind this there will be a rule not of the Indian government, but of the Swiss government. Let us know about it in detail.

Why can Maggi become expensive?

The reason behind Maggi becoming expensive is the suspension of the Most-Favoured-Nation (MFN) clause under the Double Taxation Avoidance Agreement (DTAA) signed between India and Switzerland in 1994. Actually, Switzerland has decided to suspend this clause from January 1, 2025. The move followed a 2023 judgment by the Supreme Court of India, which held that the MFN clause does not apply automatically, but rather requires notification from the Government of India for its implementation.

What is MFN clause?

The purpose of the MFN clause is to ensure that countries participating in a bilateral tax agreement provide equal benefits to each other. Switzerland has alleged that India provided more favorable tax benefits under DTAA with other countries, such as Slovenia, Lithuania and Colombia, which were not available to Swiss companies. In view of this disparity, Switzerland decided to suspend this clause from 2025.

Impact on Swiss companies

The biggest impact of this decision of Switzerland will be on companies like Nestle, which have a large share in the Indian market. Under the new rules, Swiss companies will have to pay tax of up to 10% on dividends received from Indian income sources. Currently this rate was 5%, which is applicable in India’s DTAA with other countries.

Nestle and other Swiss companies had argued in the Supreme Court that they should also get the benefit of 5% tax rate like countries like Slovenia and Lithuania. However, the Supreme Court rejected his argument.

danger of expensive products

After Switzerland’s decision, prices of Nestle products like Maggi, milk products and other food items are likely to increase in the Indian market. The reason for this is the increased tax burden, which will increase the costs of these companies. This will have a direct impact on consumers, who may have to buy these products at a higher price.

Supreme Court decision

The Supreme Court of India had clarified in the year 2023 that the MFN clause does not apply automatically. For this the Government of India has to issue a notification. Switzerland decided to suspend the clause, citing lack of reciprocity.

This move of Switzerland may also affect the bilateral trade relations between India and Switzerland. Products will be expensive for consumers and the competitiveness of companies may also be affected. Although this change will generate additional revenue for the government, it may prove to be a challenging time for Swiss companies and Indian consumers.

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