Price Hike: Maggi May Get Expensive as India-Switzerland Tax Dispute Heats Up
Price Hike: Maggi May Get Expensive as India-Switzerland Tax Dispute Heats Up
Swiss companies, including Nestlé, face higher dividend tax; price hike expected from January.
Maggi, the beloved two-minute snack, might soon see a price hike starting January 1, 2025, as inflation and tax disputes take center stage. The increase comes after the Indian Supreme Court upheld a decision impacting the Double Taxation Avoidance Agreement (DTAA) with Switzerland.
Switzerland had signed the DTAA with India in 1994, which included the Most-Favoured-Nation (MFN) clause. This clause allowed Swiss companies, like Nestlé, to enjoy a reduced 5% dividend tax rate on Indian earnings. However, India has now decided to suspend the MFN clause, increasing the tax rate to 10% from January 1, 2025.
Switzerland retaliated by ending the MFN benefits, stating that India had not extended similar tax advantages as it did to other countries. The Indian Supreme Court further ruled that the DTAA cannot be enforced unless it is officially notified under the Income Tax Act, leaving Swiss companies, including Nestlé, to bear the brunt of the tax hike.
With a higher 10% dividend tax rate, Nestlé and other Swiss enterprises face a squeeze on profits. This financial burden is expected to be passed on to consumers in the form of higher product prices. In 2022, Maggi prices had already risen by ₹2 per packet, and another price hike now looms.
As relations between India and Switzerland sour, the price of everyday products like Maggi and other Swiss brands could rise significantly. With Nestlé’s plea for a lower tax dismissed by the court, the company is likely to adjust its pricing strategies to maintain profitability.
Consumers may soon have to shell out more for their favorite two-minute noodles and other Swiss products starting January next year.
