The order of the National Anti-profiteering Authority (NAA) under the Central Goods and Service Tax Act, 2017 on December 24 against an anonymous complaint against Hindustan Unilever Limited (HUL) is a welcome one as this has given a very strong message to the business houses who are reluctant to pass on the GST benefits to its customers.
The complaint from a consumer choosing to remain anonymous was received by the Standing Committee on Anti-profiteering on November 26. The complaint says in spite of the reduction of tax rates from 28 per cent to 18 per cent, HUL did not pass on the benefit to the consumers. This, they did by increasing the base price and keeping the MRP as unchanged.
The matter was forwarded for investigation to the Director General Anti-profiteering (DGAP) who found that India’s largest Fast Moving Consumer Goods (FMCG) company did actually denied the benefit of reduction of prices due to lower tax rate. During the hearing, the company presented a suo-moto statement in which it showed they did make a GST gain amounting to Rs. 480.91 crore and claimed certain deductions and offered a sum of Rs 160.22 crore for a period from November 15, 2017 to February, 2018.
Admission is that they have clearly violated the provisions of S. 171(1) of the CGST Act which states “any reduction in rates of tax on supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.” The question as to whether there was a violation or not of this provision was not in question before the NAA, but the quantum of such profits made by denial of benefits and the Trans-2 credits that accrued to HUL was the moot question.
The DGAP estimated the profits unduly accrued to HUL to be to the tune of Rs. 494.73 crore. This was from various range of products sold by HUL which numbered to 12,016. It was an interesting point that the sales volume for the year 2017-18 increased only by 2 per cent whereas, the profits soared by 19 per cent.
After extensive arguments and many averments from HUL and multiple hearings, the NAA pronounced the order stating that HUL has amassed a whopping Rs 455.92 crore on account of “denial of benefit” to consumers along with a Trans-2 credit of Rs 78.97 crore. Thus, this largest FMCG company in India has fleeced its loyal customers of Rs 534.89 crore! The NAA allowed a deduction under various grounds like grammage, supplies to CPF/CRPF, etc., an amount of Rs. 383.25 crore was confirmed as the net amount unduly earned by HUL: the price paid by customers for their loyalty. It is a shame on the part of the company.
Companies like HUL will go on, whether or not they have to pay back the money to the consumers of the government. In this case, as the consumers are unidentifiable, 50 per cent of the amount will have to be remitted to the Central Consumer Welfare Fund and the balance to the respective 35 State/UT authorities. This they may do or may fight in higher judicial authorities. The NAA has also asked HUL to show cause why penal provisions should not be invoked. This can even lead to cancellation of registration. The authority may certainly not cancel.
Indian consumers will have to learn one thing from this rather fast judgement by the NAA. The machinery to monitor and implement legal provisions to ban profiteering by denial of benefit to the customers due to them because of a reduction in rate is certainly working. It is for the “grahak” the consumer to stop grumbling and cursing and not taking a little time to point it out to the authorities for strict, stern and immediate action.
Not many orders have been passed by the NAA till now, but this 98-page judgement will certainly go a long way in making the corporates and even MSME sellers think twice when they hold back the benefits that are due to the consumers. The government has recently reduced the tax rates of many products, do keep a close watch and keep reporting about any benefit that you did not get from the seller!
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