After the implementation of GST, the council have decreased taxes on multiple products in various meetings. But customers are unable to enjoy the full fruits of these deductions on taxes. After the frequent bombardment of complaints regarding this from customers, the government is looking forward to building a framework which will enable customers to avail maximum benefit of reduced GST rates. There is no fixed rule under GST law to curb this situation, due to which, companies fail to provide the instant benefit of tax reduction to customers.
Also, note that there can be a fixation of timeframe to provide benefits to customers by the government. The Finance Ministry officials also cleared that there can be a fixed timeframe to pass on the benefits after the rate cut. The stock will also be taken care of with the prohibition on the change in product packaging and weight increment.
Companies increase the weight of the packets instead of lowering down the prices. The official said that reducing the price of the products that are already available in the market at the time of deduction of tax is in the hands of the distributors and retailers.
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Manufacturing companies have nothing to do with that whereas input tax credits are given to them. Under the GST Act, an anti-profiteering authority has been set up to offer the benefit of tax deduction to customers.
More complaints Against FMCG Companies
GST authorities have no precise way to evaluate profits and so they do not have any evidence to challenge the penalties on companies in the courts. After the GST implementation on 1 July 2017, the first GST deduction was witnessed in Nov 2017 when it was appealed that both the rates should be displayed on the packet of the product in order to seek the reduction which means the difference between the older rate and the modified rate but the same could not be followed for a long time. Most of the complaints of customers are against FMCG companies. FMCG Companies have not curtailed many prices on hand wash, deodorant, and other cosmetics products as compared to a reduction of tax on them.
Methods to Deposit Money in the Welfare Fund
Section 171 of the GST Act states that money gained from additional profits should be reimbursed to the customers. When this act of returning back the money to customers is not feasible, the company is obliged to deposit money in the Consumer Welfare Fund. But there is no such method available to calculate the figures for additional profits.
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The National Anti-Profiteering Authority found that the country’s largest FMCG company- Hindustan Unilever (HUL), did not pass the benefit of tax saving of Rs 383 crores to its customers. For which the company deposited 160 crores in the Consumer Welfare Fund. Hence, a penalty of Rs 223 crores was imposed on the company but the Delhi High court halted it for now as the company appealed the court saying that there is no any such scale present through which it can be confirmed that customers have gained the benefits or not.
