Maggi, a comfort food for millions across India, may become more expensive from January 1, 2025. This potential price rise is linked to Switzerland’s decision to suspend India’s most favored nation (MFN) status under the double taxation avoidance agreement. Tax burden on Swiss companies like Nestle, the parent company of Maggi.
Switzerland’s MFN suspension and its implications
Switzerland plans to withdraw MFN clause for India from January 2025 Established in 1994Under this section, Swiss companies benefited from preferential trade conditions, including lower tax rates. Without MFN status, Swiss companies may face up to 10 per cent tax on dividends from Indian income sources, much higher than the current rate.
Impact on Nestle
Swiss company and Maggi manufacturing company Nestlé have been directly affected by this development. The increased tax burden on Nestle’s Indian operations may prompt the company to adjust product pricing to maintain profitability. Although Nestle has not officially confirmed the price hike, the possibility of it has increased due to the suspension of MFN status.
What is the most favored nation segment?
The MFN clause ensures equal trade benefits between two countries. This includes low tariffs and duty-free import-export for specific products. Countries with MFN status are given preference in trade relations, enjoying favorable terms. Switzerland’s decision to revoke the MFN status stems from its perception that India has not extended similar benefits to other countries under more favorable tax treaties.
How might this impact Indian consumers?
The potential price hike of Maggi is likely to impact millions of consumers who depend on it for affordability and convenience. Be it a late night snack, a quick meal during a busy day, or a casual meal in the mountains, Maggi has become a staple dish in Indian households. The price increase could challenge its status as a budget-friendly favorite.
