Hindustan Unilever found not passing lower GST benefit

NEW DELHI: The National Anti-Profiteering Authority (NAA) has found consumer goods giant Hindustan Unilever (HUL) of not passing on the benefits of lower GST of over Rs 383 crore to consumers and issued a notice for levying a penalty.

The issue relates to HUL denying benefit of a GST cut in November 2017 to consumers. NAA estimated the amount of profiteering by the multinational company at close to Rs 535 crore, of which around Rs 455 crore was denial of benefits to consumers. Of this, some credits were given to HUL, resulting in undue gains of Rs 383 crore, the agency said in an order released on its website.

In a statement, HUL said: “We have always maintained that GST is a progressive reform which will benefit consumers and the industry at large. In the absence of set rules and guidelines on profiteering, we have gone by the spirit of the law, and we passed on the entire benefit received under GST to consumers — either through reduction in prices or through increase in grammage. HUL has since suo moto deposited Rs 160 crore (including Rs 36 crore on behalf of our redistribution stockists) into the government’s Consumer Welfare Fund. During the entire process, we have kept the government informed of the approach and the manner that we had adopted in passing on GST benefits to consumers. The Directorate General of Anti-Profiteering (DGAP) had submitted a report, which we had responded to in a comprehensive manner. We are reviewing the order issued by NAA. We will explore all possible options.”



A DGAP investigation had revealed that HUL had increased the base price of products, enabling it to maintain the pre-November 14, 2017 selling price, despite GST on several products being lowered. It said the company had “admitted” to profiteering and “suo motu quantified the profiteered amount”. It estimated the amount at close to Rs 496 crore, including transitional credit.

HUL said it had reduced GST from November 15, 2017 but MRP for products in the pipeline could not be cut during the transition period. As a result, it volunteered to deposit the excess collections.

It cited practical difficulties in fully passing on the benefits. For instance, the price of a sachet of shampoo that cost Rs 1 would come down to 92 paise to pass on the benefit. To round it off, the sale price would have been reduced to 50 paise, a 50% cut, which HUL said, “could not be the intent of the law or reasonable interpretation”.