The National Antiprofiteering Authority (NAA) said India’s biggest consumer goods company Hindustan Unilever Ltd benefited to the tune of Rs 535 crore by not passing on gains from lower GST to consumers. This is the largest anti-profiteering amount determined by the authority. However, the authority took into account the increase in rammage the company implemented to compensate for lower taxes under GST instead of lowering prices. It’s the first time the agency is doing so even though the rules recognise only price reduction as means of sharing the tax benefit. Accordingly, the 98-page order gave HUL credit of `68.77 crore for the move while deciding the quantum of supposed profiteering.
The company had claimed Rs 119.67 crore of grammage benefit to consumers. The authority has directed the company to deposit Rs 462.32 crore in the consumer welfare funds of the Centre and the states after subtracting Rs 68.77 crore and Rs 3.8 crore for supplies to security forces on which there was no GST. The order considered 12,016 items supplied by the company across product ranges. The order by the three-member bench also said a fresh notice should be issued to HUL asking why penalties should not be levied for violation of anti-profiteering rules. It also directed the company to reduce the prices of products appropriately. The order relates to the period between November 15, 2017, and February 28, 2018, and is said to relate to home, food and personal care products.
The authority has also directed the Directorate General of Anti-Profiteering (DGAP) to investigate whether the company passed on benefits of lower GST for all its products and, if not, to determine the amount it has benefited by. The company had previously voluntarily deposited Rs 160 crore, including Rs 36 crore on behalf of distributors, in the government’s Consumer Welfare Fund, which will be adjusted against the amount it needs to pay now. “In the absence of set rules and guidelines on profiteering, we have gone by the spirit of the law, and we passed on the entire benefit received under GST to consumers — either through reduction in prices or through increase in grammage,” the company said in a statement “We are reviewing the order issued by the National Anti profiteering Authoritystatement.
“We are reviewing the order issued by the National Anti-profiteering Authority. We will explore all possible options.” The penalty is based on investigations by DGAP following three complaints. “It is clear that the respondent (HUL) has resorted to profiteering being very well aware of the law and the rules which warranted him to pass on the benefit of GST rate reduction,” the authority said in its order. “He has further acted in conscious disregard of the obligation which was cast upon him to pass on the benefit of GST rate reductions.”
NAA was set up to ensure manufacturers and service providers passed on the benefit of lower taxes under GST and that derived from the seamless availability of input tax credit. The amount has to be returned to customers, but where this is not feasible, it has to be deposited in customer welfare funds. The authority is intended to be in existence for two years but its term can be extended by the GST Council. Benefit not passed on Based on the investigation by DGAP and the data available, the authority determined HUL benefited to the extent of Rs 455.92 crore by not passing on gains from lower GST rates.
HUL had also claimed Rs 78.97 crore of TRAN-2 credit, the benefit of which was also not passed on, taking the total to Rs 534.89 crore, the report said. This latter amount has to be deposited in the central consumer welfare fund, as the amount relates to central taxes and duties. After subtracting the amounts cited above from Rs 455.92 crore, the amount remaining is Rs 383.35 crore. Half this amount, Rs 191.68 crore, is to be deposited in the central consumer welfare fund and the other half in those of the states. HUL had, in its submission, determined extra collection by it at Rs 320.70 crore over this period but claimed Rs 119.67 crore was passed on as grammage benefit and sought other deductions as well.