FMCG Companies Came Forward To Disclose Profits Under GST

The National Anti-Profiteering Committee owns an overarching mandate under GST. The Indian GST, a complex indirect tax structure, categorizes goods and services in five tax slabs viz. 0%, 5%, 12%,18% and 28%. However, post-implementation, changes in GST rates of goods and services were done by the Government as per the requests and concerns of the taxpayers. In order to ensure that benefits of tax reductions went to the consumer, the ACC appointed the NAA. And since its appointment, the NAA has been tightening its grip on entities and firms over non-passing of benefits from GST rate reduction to the consumer.

The Fast Moving Consumer Goods (FMCG) sector is the first in line under the NAA’s vigilant radar. Reportedly, Hindustan Unilever Limited, a major FMCG player, has voluntarily disclosed benefits under the GST. The total benefits post GST rate reduction amount to a whopping 1.19 Billion. The GST benefits are for the period November-December 2017. The accrued were a result of deduction in GST rates of daily use goods from 28% to 18%.

Reportedly, November 15 was the last date for passing the benefits to consumers. But following a notice from the Director General of Safeguards, a subsidiary wing of the NAA, HUL opted for the voluntary disclosure. However, Sanjiv Mehta, Managing Director and Chief Executive Officer of HUL said, “It was important for us to act decisively for the benefit of consumers. We have, therefore, offered to pay the amount suo motu to the government’s consumer welfare fund,”.

The Impact of HUL’s Decision

FMCG Industry experts believe that this could set a novel precedent for other companies. Because of the volumes, voluntary disclosure is the ideal option for companies that face difficulties in passing on the benefits to the consumers.

Why the FMCG Sector?

Tracking of benefits not passed to consumers is comparatively easy in the FMCG Sector. Being a maximum retail price-led industry, any reduction in GST rates is immediately reflected in the products final price. The immediate impact helps Government Bodies to easily crack down non shared benefits.

Some industry insiders also believe that the work of the Government has been passed on to the entities or firms. While the industry leaders complain that they have no control over the goods once they leave company godowns, yet it is left upon them to ensure that the benefits are passed on. Hence voluntary disclosure and passing on the benefits to the Consumer Welfare Fund set up under the GST is an ideal step forward.

Although in some cases FMCG companies have opted for adding stickers on their products to tell them about the reduced MRP but still some part of the inventory may be unintentionally left out. Also, the responsibility of the dealers, distributors, and retailers in passing the benefits from reduced GST rates along with trade discounts and incentives increase by manifold. A common sentiment across the industry is that passing on the benefits and does not completely rest on the Firms shoulders, a more vigilant and willing supply chain is the primary need for.