GST benefits: HUL mulls taking legal options against anti-profiteering order

The country’s largest consumer goods maker Hindustan Unilever (HUL) has said that it might consider taking legal recourse against the GST profiteering order of the National Anti-Profiteering Authority (NAA), a government body. The NAA had fined the FMCG major with ₹383 crore and ordered further investigation.

According to the GST anti-profiteering authority, HUL has apparently profited and not passed on the benefits, which the company got from the Goods and Services Tax rate cuts, to its consumers. The NAA, in an order passed against the company on December 24, said the company has only deposited an amount of ₹160 crore.

The anti-profiteering provisions clearly mention that the benefit of any GST reductions or of input tax credit must be passed on to the consumer. However, it has not clarified on how the benefits should be passed thus making it ambiguous.

In a clarification to the stock exchanges, HUL said that, “The NAA order refers to the need to pass on the benefit of reduction in rates to consumers which is fully consistent with HUL’s stand and actions. However, it makes a narrow interpretation of the law and does not take into account well established industry practice backed by law. Also, no methodology has been determined by NAA as required under law to determine if benefit has been passed or not. Given there is divergence on some basic issues, HUL will consider legal options available to it.”

It further said that in the absence of set rules and guidelines on profiteering, HUL has gone by the spirit of the law, and passed on the entire benefit received under GST to consumers – either through reduction in prices or through increase in grammage.

In addition, HUL said that it had “suo moto” offered to pay to the government the benefits amounting to ₹160 crore, which accrued to the company but could not be passed on to consumers and the amount has been deposited with the Consumer Welfare Fund of the government.

HUL, the maker of brands such as Lux, Ponds and Dove, during its last quarterly earnings meeting had said that the company has submitted its interpretation on how to pass the benefits. But NAA has not accepted the submission. According to HUL, the benefits could be passed on through price cuts or even through changes in grammage (or weight of the products).

HUL disclosed its inability to cut prices immediately and had even voluntarily calculated and deposited the additional amounts it collected with the government, it had said earlier.