Hindustan Unilever faces GST profiteering probe
New Delhi: Anti-profiteering investigator Directorate General of Safeguards (DGS) has a sent a notice to consumer goods maker Hindustan Unilever Ltd for alleged profiteering under the goods and service tax (GST) regime.
DGS has previously launched investigation into five other businesses for allegedly not passing on the benefit of tax reduction to consumers in the new indirect tax regime that kicked in from 1 July.
An HUL spokesperson confirmed receiving the DGS notice and said the company was fully committed towards ensuring that all benefits arising from reduction in GST rates are fully passed on to the consumers.
“We have received a notice on 16 January from DG safeguards and we are in the process of ascertaining the full details. We will respond to the same stating our position,” said the spokesperson.
HUL also said it has communicated to trade asking them to pass on the benefits to consumers.
“We have accelerated our networks covering more than 800 stock-keeping units (SKUs) to reduce prices and increase grammage in case of price point packs and most of these have already landed in the market. List of key SKUs with lower prices and increased grammages is available on our website. In addition, HUL has also been communicating the price reductions or increased grammages through advertisements in more than 10 languages,” said the spokesperson.
Concerns of profiteering is a worry for policy makers who are keen to see that the tax reform benefits the common man. However, officials admit that the legal provisions in GST laws dealing with profiteering are not foolproof as there is nothing that prevents producers from raising the price in a free market economy, claiming higher input costs. The drive against profiteering is set to test the robustness of the law. Experts argue that regulatory action against profiteering is more in the nature of price regulation than of taxation.
“Unless the concerned commodity is one that is statutorily subject to price regulation by way of maximum price ceiling, it would not be possible to effectively use the current mechanism to ensure that benefit of reduced tax is passed on to the end customer,” said Manoj S.R., a New Delhi-based lawyer.
“Anti-profiteering is not a foolproof law. However, the actions of companies have to be benchmarked against reasonableness. Competition in the market will ensure to a great extent that the tax benefits are passed on to consumers,” said a tax official, who asked not to be named.
Hardcastle Restaurants Pvt. Ltd, which runs McDonald’s restaurants in west and south India, department store chain Lifestyle International Pvt. Ltd and a Jaipur-based trading company are among the firms issued notices under the anti-profiteering provision so far, Mint reported on 30 December.
If the Directorate General of Safeguards finds a business guilty of profiteering, the NAA can order it to reduce prices or return to the buyer an amount equal to the tax not passed on. A profiteering business will have to pay 18% interest on the tax reduction not passed on to consumers. It can also attract a penalty and could cost a business its registration.