NAA asks P&G to pay Rs 241 crore in penalties for not passing GST rate cut to consumers
In a major setback to the market reputation of multinational giant Procter & Gamble, the GST’s Anti-profiteering body on Thursday indicted the company of profiteering. According to inputs, P&G has been asked to deposit Rs 241.5 crore.
Responding to the claims, P&G cried foul, claiming that it has not violated the law and will explore all legal options.
The National Anti-profiteering Authority (NAA) has upheld charges of profiteering of over Rs 243.93 crores against Procter & Gamble. Citing an FIR received in April 2019 from the DG Anti-profiteering (DGAP), the NAA alleged that the company was not passing on the reduction in GST rate from 28 per cent to 18 per cent from November 2017.
In addition, the DGAP also alleged that Procter & Gamble raised the prices of 1,383 goods after the reduction in tax applicable on these goods was announced. The DGAP had stated that this was a contravention of CGST rules and that the company had profiteered by Rs 241.5 crores as a result.
The NAA said in its ruling, “Respondents have denied the benefit of rate reduction to the buyers of their SKU (Stock Keeping Units) in contravention of the provisions of section 171 (1) of CGST Act, 2017 and they have resorted to profiteering.”
In its order, the NAA also mandated that half of the profiteered amount of Rs 241.5 crore must be deposited in the Central Consumer Welfare Fund (CCWF) and the remaining with 33 Consumer Welfare Fund of various states and UTs.
The NAA also said that the amount has to be deposited along with 18 per cent interest payable from the date of the profiteered amount realised by the company till the date of deposit.
Products were sold to millions of ordinary consumers who are not identifiable and the extra amount charged cannot be refunded to them, the NAA added.
Troubles are not over for the global giant as the profiteering watchdog NAA has asked the DGAP to further probe and compute the profiteered amount on the stock which was lying with the company’s distributors and retailers.
Ministry of Consumer Affairs, DGAP
The Ministry of Consumer Affairs has also been directed to verify why the sticker informing price reduction post rate cut was not affixed on the lying stock.
The DGAP had claimed that documents submitted for scrutiny by Procter & Gamble revealed that “invoices raised by the company’s trade partners pertained to the ‘sales promotion’ services which were reimbursed to them. The invoices did not indicate that they were related to passing on the benefit of reduction in the GST rate from November 15, 2017”.
The contention of the company that base prices were increased to offset the rise in the cost of production/raw materials cannot be accepted since the increase in inputs had not happened overnight to coincide with the GST rate cut, the DGAP pled before the NAA.
On the other hand, Procter & Gamble claimed that it passed on the rate cut to consumers through consumer promotion schemes.
However, the NAA said that the rules do not provide for any other means of passing the benefits of rate cut or input tax credit except by way of commensurate reduction in prices of products.
The DGAP, which functions under the Central Board of Indirect Taxes (CBDT) and Customs, had alleged that Procter & Gamble Home Products (PGHP), Procter & Gamble Hygiene & Healthcare (PGHH) and Gillette India (GIL) did not pass on the benefits of reduction in the rate of GST from 28 per cent to 18 per cent with effect from November 15, 2017 by a commensurate reduction in the prices of products being sold by the companies. All of the three companies are part of P&G listed as respondents in this case.
Initially, the DGAP had assessed a profiteering amount of over Rs 243.93 crore. The same was reduced to Rs 241.5 crore by the NAA in its ruling after due scrutiny.
No violation of law: Procter & Gamble
A spokesperson for Procter & Gamble (P&G) said, “As a responsible corporate, P&G has entirely passed on the net commensurate benefit under GST to the recipients.”
“The Company communicated the benefit through advertisements to spread awareness among consumers, shoppers and retailers,” the spokesperson added.
The Procter & Gamble spokesperson went on to say, “The company stated that it along with the industry, has been requesting the authorities to bring out a clear set of rules and regulations to eliminate ambiguity and complexity in this area. The company will review the order by NAA, and assess all possible legal options. We are hopeful that our stand will be vindicated.”