The National Anti-Profiteering Authority which was set up under GST to ensure that benefits from the reductions in GST rates must reach the common taxpayer must and the NAA must be applauded for the good work it has done so far to safeguard consumer welfare. Accordingly, Nestle, the maker of KitKat chocolates, Nescafe coffee, and Maggi noodles, had set aside the excess amount to be later deposited in the consumer welfare fund. The food processing company said in a statement, “In situations where the benefit could not be passed on instantly by the reduction in MRP (maximum retail price) or increase in grammage, the amount was set aside to be subsequently passed on and was not reckoned either in sales or in profit”.
Reportedly, the GST Council in order to curb the momentary inflation due to the introduction of the GST had reduced the GST rates of 178 daily use products. Among these, GST rate of 28% on chocolates and cocoa-based products was brought down to 18%. As per the observation of the NAA, Real Estate and FMCG sectors had failed to pass on the benefits of input tax credit as well as those of the revised GST rates.
The Directorate General of Safeguards (DGS) who is bestowed upon the responsibility to identify and curb such discrepancies has repeatedly called upon companies to immediately pass on the benefits of the reduced GST to the end consumer. In case, the stocks were already part of the retail channel with older, higher price tags companies need to deposit the differential amount as part of the consumer welfare fund.
However, as per Nestle, it had received no such summon from the anti-profiteering authority. At its own behest, Nestle has been advised by the DGS to deposit the erstwhile amount in the Consumer Welfare Fund after furnishing the necessary documents. A Noteworthy point here is that the amount has been calculated by Nestle itself. The DGS has asked Nestle to furnish all documents before depositing the agreed-upon sum.
Other FMCG Companies
Earlier we had reported on how FMCG and Real Estate sector were taking the Major Hits post the formation of NAA. Recent developments which cement such claims include:
- Hardcastle Restaurants, which runs McDonald restaurants in west and south India, was also served similar notice by the DGS.
- Upon receiving notice from the anti-profiteering body, Hindustan Unilever will deposit ₹119 crore in the consumer safeguard fund as part of passing on the benefits of lower GST rates to the consumer
- DGS also sent notices Jubilant FoodWorks for not passing on the benefits of reduced GST rates to Domino’s, Pizza customers.
- Retail and Automobile Sector too could not escape the vigilant eye of the DGS. Reportedly, Lifestyle International and Honda Motor have been served notices from the National Anti-profiteering Authority.
What do the Experts say?
Tax Experts believe that a robust framework is the need of the hour to facilitate instant price reduction post changes in GST Rates. Voluntary payment can also be a viable solution in this regard. As per Pratik Jain, indirect tax leader, PwC,”At times it is not commercially feasible to reduce price immediately, particularly for a stock with preprinted prices”. He further added that some guidance on compliance must be provided to manufacturers in specific cases where Goods whose GST rates have been slashed are already stocked with retailers.
