The Directorate General of Safeguards, an investigating body under the revenue department, has issued notices to McDonald’s, Lifestyle, and a HUL stockist based on the reference from the National Anti-Profiteering Authority. Photo: Pradeep Gaur/Mint
The Directorate General of Safeguards, an investigating body under the revenue department, has issued notices to McDonald’s, Lifestyle, and a HUL stockist based on the reference from the National Anti-Profiteering Authority. Photo: Pradeep Gaur/Mint

McDonald’s, Lifestyle, and HUL stockist among first to be investigated by anti-profiteering body

The anti-profiteering watchdog set up under GST law has launched investigation into McDonald's, Lifestyle, and a HUL stockist for allegedly not passing on the benefit of tax cuts to customers

New Delhi: The anti-profiteering watchdog set up under goods and services tax (GST) law has launched investigation into three entities for allegedly not passing on the benefit of tax cuts to customers.

The entities facing investigation are Hardcastle Restaurants Pvt. Ltd, which runs McDonald’s restaurants in West and South of India, department store chain Lifestyle International Pvt. Ltd and a Jaipur-based trading company dealing in consumer packaged goods made by Hindustan Unilever products, a person familiar with the development said on condition of anonymity.

The Directorate General of Safeguards (DGS), an investigating body under the revenue department, has issued notices to these entities based on the reference from the National Anti-Profiteering Authority (NAA), added the person.

The DGS has three months to complete the investigation, which could be further extended by three months. After that the NAA led by chairman B.N. Sharma has three months to decide on the findings including the penalty if warranted, explained a second person on condition of anonymity.

Amit Jatia, vice chairman of Hardcastle Restaurants, which is the McDonald’s partner for South and West India, did not respond to messages, calls and emails at the time of going to press.

E-mails sent to Lifestyle International Pvt. Ltd remained unanswered at the time of going to press. Mint could not immediately reach Sharma Trading Co. in Jaipur.

The NAA has been set up to ensure that businesses and traders do not profiteer by way of retaining the tax benefits meant for consumers, which according to experts, is a challenging task. While GST law requires businesses to pass on benefits of tax reduction and tax credits to consumers, there is nothing in the law that prevents a company from raising prices subsequently, unless prices are regulated under the Essential Commodities Act. This makes decisions taken under the anti-profiteering provision vulnerable to legal challenges.

The second person quoted above said that the Authority will take special care so that honest businesses are not harassed. “We have to be cautious and judicious in exercising the anti-profiteering provision," said the person.

“HUL is committed to ensuring that the benefits because of reduction in GST rates are passed on to the end consumers. We have communicated to the trade to pass on the benefits of GST rate reduction to the consumers. Most of the products in the form of lower prices or increased grammage have already started landing in the market. HUL has also been communicating the price reductions or increased grammage widely through advertisements," an HUL spokesperson said, in response to an emailed query.

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