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The National Anti-profiteering Authority (NAA) on Monday held Hindustan Unilever (HUL) guilty of profiteering, for failing to pass on the benefit of lowered Goods and Services Tax on certain FMCG products. However, the authority has admitted the company’s claim that its customers benefited through higher grammage, which was rejected in some cases earlier.
Reacting to the order, HUL said it is exploring all options and maintained that it has passed on all the benefits of rate cuts on various goods to consumers.
The core of the issue is the reduction of GST on 178 items to 18 per cent from 28 per cent, which came into effect from November 15, 2017.
The reduction covered items such as detergents, washing and cleaning preparations, liquids and creams for washing the skin, shampoos, shaving cream and beauty or make-up preparations.
Soon after the order, an anonymous complaint was filed before the Director General, Anti-Profiteering, alleging that the FMCG major had not passed on the benefit of lower taxes to its customers.
After a probe, the authority held that the company profiteered to the extent of ₹455.92 crore by not passing on the benefit to its customers. It was also held guilty of wrongly availing itself of the benefit of TRAN-2 credit (credit on tax paid under the pre-GST regime) to the tune of ₹78.97 crore. The total profit arising out of the alleged infractions was calculated to be ₹534.89 crore.
However, the authority allowed the company’s claim of ₹68.77 crore, which the latter said was the value of benefit passed on to the consumers by way of higher grammage.
It also allowed ₹3.80 crore for the supplies made to the armed forces. Adjusting for these amounts and the amount already paid, the company will have to deposit ₹383.25 crore with the Consumer Welfare Funds at Central and States levels.
Anita Rastogi, Indirect Tax Partner at PwC, said: “Good news is that passing on the benefit by way of increase in grammage has been accepted by the authority.”
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