FMCG Companies Ready to Ditch Anti-Profiteering GST

The anti-profiteering measure has been included for the sake of the common man who can also enjoy the tax benefits indirectly through the products he purchases in the market. It says that any profit arising out of the tax benefits must be passed to the consumers after the implementation of the GST. If in case, any company found evading these measure will have to go through strict policies and even penalties.

This time FMCG companies made a full proof plan to by-pass anti-profiteering measure to ensure its benefits and profits, letting common people go in the bin. There are various strategies that these FMCG companies are adopting to safeguard themselves from the profit distribution and also making them safe from any penalties which may strike on them due to the surge in the profits after the GST.

Many of the industry insiders and experts have now cleared that there are basically three strategies that these FMCG companies are trying to assume in their operations to make them protected from the anti-profiteering laws. These strategies are minuscule for a common man but in revert can give whole lot of benefits even after the tax benefits are garnered by them.

The first strategy which is revealed by the industry insider is that the companies are reducing the weight of their products, but still the maximum retail price will be unchanged. As the companies are free to launch new products and can present them in new pack sizes, the overall agenda is to show higher profits before the implementation of the GST.

Coming to the second strategies that these FMCG companies are adopting to escape the anti-profiteering measure is that they are asking their vendors to quote higher prices on the supplies. The measure is very straight forward and down to the level of market viciousness as asking for the higher price quotation will let them set free in the eyes of government authorities due to the reason of higher input cost.

As stated by a company insider said that “Companies have been asking their vendors to increase the prices so that they can pass it on to customers, The companies would then, claim the price increase by their vendors is due to inflation or rise in material costs.”

Read More : What is Anti-Profiteering Clause in GST India?

Now the third way to escape the harsh provisions of anti-profiteering is to make adulterations into the making of products. The strategy is aimed to reduce the costing of a product as told by a source, “Vendors have been asked to dilute some of the products, such as shampoos and body wash.”

HUL, P&G and Marico are some of the FMCG giants who have recently hiked the prices of the products in almost every category to rely upon the costing factor to escape the unit profiteering while attributing the price increase to the input cost and inflation altogether with no meaningful proof.

Revenue officers from Mumbai have cleared out that change in size and composition cannot be scanned by the government authorities and mentioned that, “If there is a jump in profits from a product (after GST), the company can say it’s not an apple-to-apple comparison because the size and composition of the product is different.”

The strategies are targeted to show an increase in the profits in the month of June just to refrain from the showing the profits after July accrued from GST. As speculated by the industry experts, the anti-profiteering provision will be hard to levy upon industries carrying out these types of practices. But as it is learned that most of the Indian companies don’t indulge in such illegal activities, it is ensured that they will pass the benefits to the customers. However, the companies also asked the vendors for spilling down the prices but it is under the management to take the final decision.

MS Mani, senior director, Deloitte Haskins & Sells mentioned that “The anti-profiteering legislation has been drafted in a very wide manner, which may give rise to misinterpretations and disputes with businesses. Any change in prices or profitability may not be due to tax rate reduction or increase in input tax credits, and there are several other factors which could potentially be misread by tax authorities.”