National Anti-Profiteering Authority and Hindustan Unilever Ltd. are at loggerheads again over the latter’s move of passing GST benefits by offering customers more grammage for the same price as a commensurate to price reductions. Reportedly, Unilever’s ‘extra grammage offer’ has been stated unacceptable by the Directorate General of Anti-Profiteering.
Hindustan Unilever had earlier voluntarily deposited Rs 160 crore as the profiteered amount in the consumer welfare fund under GST. However, the NAA has noted that the consumer goods maker actually profiteered to the extent of Rs 495 crore using alternatives like extra grams for the same price for passing on GST benefits. The Directorate General argued that a reduction in tax rate must be passed on to customers in the form of reduced price and not in the form of extra grammage as “commensurate” to a rate cut.
GST rates were reduced on in November 2017. Post this, HUL suo moto deposited Rs 160 crore in the government’s Consumer Welfare Fund. Further, the government was pre-informed about the approach and manner undertaken to pass on the benefits.
An HUL spokesperson said in an emailed statement, “In the absence of set rules and guidelines on profiteering, we have gone by the spirit of the law, and we passed on the entire benefit received under GST to consumers—either through a reduction in prices or through an increase in grammage”. Srinivas Pathak, the chief financial officer of HUL, said: “We’re explaining to them (the NAA) that it’s a standard industry practice, especially for packs priced at Rs 2, 5 or 10 each, We’re hopeful that they will take this into account before passing an order.”
The Expert Word
The GST laws clearly state that benefits from rate reductions must be passed via equivalent rate reductions. Hence, grammage passing as benefits is debatable. GST laws are itself ambiguous when applied to promotional schemes like bonus quantities and free gifts. But an argument in favor of HUL could only be that the GST law nowhere mentions that increasing the quantity for the same price contradicts the current law parameters.