HUL, Jubilant FoodWorks, McDonald’s, Puri Constructions face stringent GST anti-profiteering penalties

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Hindustan Unilever Ltd (HUL),Jubilant FoodWorks Ltd, Puri Constructions, and Hardcastle Restaurants, the master franchisee of fast food chain McDonald’s, could be charged with hefty penalties running into several crores of rupees on suspected grounds of not passing on GST rate cuts to consumers. According to a preliminary investigation by Directorate General of Anti-Profiteering (DGAP), the profiteering watchdog under the new indirect tax regime, FMCG major HUL has not passed on the Goods and Services Tax (GST) benefits to the tune of Rs 495.71 crore to the consumers, sources said. An HUL spokesperson said that they had nothing to comment on the matter. Jubilant Foodworks has not responded to Moneycontrol’s email seeking response for this story.

Similarly, Jubilant FoodWorks’ pizza chain Domino’s may have to deposit Rs 41.43 crore for profiteering. Haryana-based Puri construction may have to shell out Rs 3.42 crore, while Hardcastle Restaurants may have to pay up as much as Rs 7.49 crore. The final call regarding the alleged profiteering will be taken by National Anti-Profiteering Authority (NAA), a quasi-judicial body, which is also the top decision making anti-tax evasion body under GST. The GST Council, headed by finance minister Arun Jaitley in its 30th meeting on September 28, took stock of the status of the complaints under the anti-profiteering mechanism, sources said. NAA head BN Sharma was also present at the meeting.

Under the GST-related laws, the government has introduced an anti-profiteering clause to ensure businesses transfer the benefit of input tax credit to the consumers by ‘commensurate reduction in prices’. If this is not done, the NAA can then impose penalty, cancel registration of the supplier or return the amount of benefit not passed on, along with an interest of 18 percent, depending on the details of the case. The framework of the anti-profiteering mechanism comprises a standing committee, screening committees in every state as well as the Directorate General of Safeguards, now renamed as DG anti-profiteering.

If consumers feel that the benefit of a rate cut is not being passed on to them, they can directly approach the state’s screening committee for relief. Once DGAP completes the investigation, the case is then sent to NAA, which issues the final order. According to sources, DGAP has completed 31 investigations, while 289 cases are still pending, as of September 15, 2018. Out of the 320 cases, 84 percent or 269 complaints have come against FMCG companies, while the rest are against real estate, restaurants and various other categories. Complaints started pouring in after the GST Council in November, 2017 cut rates of over 200 items across various slabs. The rate rationalisation continued earlier this year in January, and in again in July.

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