India based FMCG major Hindustan Unilever was served a notice last month by the GST Anti-profiteering committee for not passing GST benefits to their consumers. In conclusion, the company has agreed to pay Rs 119 crore, which was collected over time as GST benefit after a cut in GST rates on certain consumer products, to the government.
In a statement released in response to the notice, HUL said, “Effective November 15, GST rates were reduced for some of our categories from 28% to 18%. While the implementation of this change 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 and consequently an estimated differential amount of Rs. 119 crore was collected.”
Rejecting the claim of being fined under anti-profiteering, HUL said that they had already disclosed the matter to the CBEC in December 2017 and “The firm had voluntarily offered to pay this amount suo moto to the government. We are awaiting advice from them so that we can deposit the cheques at the earliest. We have not recognised this amount as a revenue and holding it as a liability in our books.”
As per previous reports, the company was sent a notice from the Directorate General of Safeguards (DGS) in January. DGS is responsible for verifying that companies in India are passing on the benefits after reduction in GST rates to consumers. It also sent notices to many other companies, including Hardcastle Restaurants, the company behind McDonald’s food chain, Honda Motors and Lifestyle International in the past weeks.
After a meeting held in November last year, the GST rates on certain consumer products, including toothpaste, washing powder, chocolates, shampoo and shaving creams was reduced from 28% to 18% by the GST Council. However, some businesses continue to sell their old stocks with the same GST rate. The government took this initiative to make sure that the appropriate benefits are being passed on to consumers as that was the basic purpose of the reduction in the rates.
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The companies are responsible to notify their consumers about the reduced GST rates on prices of their products in every way possible, by releasing advertisements about revised prices and updating their software to reflect new prices while billing at the counters of retail stores.
