Anti-profiteering body gives HUL time till Sept 24 to give ‘additional information’

Meenakshi Verma Ambwani Shishir Sinha New Delhi | Updated on September 14, 2018

FMCG major faces charges of not passing on GST rate-cuts to customers, making ₹400-cr profit

The National Anti-Profiteering Authority (NAA) is likely to give its ruling in the matter of alleged profiteering by the Hindustan Unilever Ltd (HUL) early next month. The allegation is that the FMCG major did not pass on the benefits of GST duty cut to consumers and thus made undue profits of over ₹400 crore.

“The Authority completed hearing on Friday. HUL sought some more time to furnish some additional information and it was granted time till September 24,” a senior tax official told BusinessLine while adding that once information made available, it will be sent to the Director General-Anti Profiteering (DG-AP) for final assessment. “After that, the Authority is expected to deliver its ruling with 10 days or so,” he said.

When contacted by BusinessLine, the company declined to comment. The core of this matter is GST rate reduction on 178 items to 18 per cent from 28 per cent which came into effect from November 15, 2017. These items included FMCG products such as detergents, washing &cleaning preparations, liquid or cream for washing the skin, shampoos, shaving cream and beauty or make-up preparations beside others.

The government wanted to ensure that consumers get the entire benefit, however it was alleged that the FMCG company did not pass the benefits to consumers. This allegation was investigated by the DG-AP. The official quoted above said the report by DG-AP talked about profiteering of over ₹400 crore.

Meanwhile, earlier this year, in a filing to the stock exchanges on January 17, HUL did inform that it had received a notice on January 16 from Director General-Safeguards (now known as DG-AP). It said that full details were being ascertained and its position would be communicated. However, it said, “We remain fully committed towards ensuring that all benefits arising from reduction in GST rates are fully passed on to the consumers. We have communicated to trade asking them to pass on the benefits to the consumers.”

The company also informed that it had accelerated networks covering more than 800 products SKU (Stock Keeping Units) to reduce prices and increase grammage in case of price point packs and “most of these have already landed in the market.”

The company also disclosed, in another press release dated January 17, that implementation of GST rate reduction was initiated immediately, “it was not possible to pass on the entire benefit of this rate reduction on some of the pipeline stocks during the transition. An estimated value of ₹119 crore was proactively disclosed to the CBEC on this count and we have offered to pay this amount suo motu to the government. This amount is not recognised as revenue and is accounted as a liability as on December 31, 2017.”

In the event, the Authority confirms there is a necessity to apply anti-profiteering measures, it has the authority to order the supplier / business concerned to reduce its prices or return the undue benefit availed by it along with interest to the recipient of the goods or services. If the undue benefit cannot be passed on to the recipient, it can be ordered to be deposited in the Consumer Welfare Fund. In extreme cases, the NAA can impose a penalty on the defaulting business entity and even order cancellation of its registration under GST.

Published on September 14, 2018

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