Hindustan UnileverNSE 0.54 % said it will consider legal options after National Anti-profiteering Authority (NAA) sent India’s biggest consumer goods company Hindustan Unilever Ltd (HUL) an order that it benefited to the tune of Rs 535 crore by not passing on gains from lower goods and services tax (GST) to consumers.
The maker of Dove shampoo and Lux soap, said NAA order, released on Monday, made a narrow interpretation of the law and does not take into account well established industry practice backed by law.
“The NAA order refers to the need to pass on the benefit of reduction in rates to consumers which is fully consistent with HUL’s stand and actions. Also, no methodology has been determined by NAA as required under law to determine if benefit has been passed or not. Given there is divergence on some basic issues, HUL will, consider legal options available to it,” HUL said in a stock exchange notice.
HUL said it kept the Government informed of the approach and the manner that it had adopted in passing on the GST benefits to consumers. However, the government authority had not taken into account the increase in grammage the company implemented to compensate for lower taxes under GST instead of lowering prices.
The NAA was set up to ensure manufacturers and service providers passed on the benefit of lower taxes under GST and that derived from the seamless availability of input tax credit. The amount has to be returned to customers, but where this is not feasible, it has to be deposited in customer welfare funds.
The authority had also directed the Directorate General of Anti-Profiteering (DGAP) to investigate whether the company passed on lower GST benefits for all its products and, if not, to determine the amount it has benefited by. Based on the investigation by DGAP and the data available, the authority determined HUL benefited to the extent of Rs 455.92 crore by not passing on gains from lower GST rates.
Since the rollout of GST in July last year, most companies, including HUL, have maintained they have passed on the benefit of lower taxes by lowering prices or increasing the weight of items. Price reduction efforts gained pace in November last year when the GST Council cut tax rates on 200 products including chocolates, toothpaste, shampoo, washing powder and shaving creams, to 18% from 28%, to ease the burden on consumers.
