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P&G, Samsung, J&J under the scanner for not passing on GST rate cut benefits to consumers

The GST profiteering investigation arm found P&G India guilty of not passing on GST rate cut benefits worth about Rs 250 crore to consumers, while J&J India is reportedly being investigated for illegal gains of Rs 40 crore. All three firms have denied wrongdoing.

twitter-logo BusinessToday.In        Last Updated: April 26, 2019  | 12:35 IST
P&G, Samsung, J&J under the scanner for not passing on GST rate cut benefits to consumers
Not passing on GST rate cut benefits?

Earlier this week, the GST profiteering investigation arm found P&G India guilty of not passing on GST rate cut benefits worth about Rs 250 crore to consumers. But the leading FMCG firm is not the only biggie under the scanner. Tax authorities have alleged that a number of big multinational companies, including South Korea's Samsung Electronics and US drug maker Johnson & Johnson, are guilty of the same, a senior government official told Reuters.

GST rates on about 178 products were cut by the GST Council with effect from November 15, 2017. Among other things, the tax rates on washing powder, shampoo, cosmetics and dental hygiene were brought down to 18% from the highest slab of 28%. As per GST anti-profiteering rules, companies have to pass on the benefit of reduction of taxes to consumers by way of commensurate cut in product prices.

P&G India's product line-up includes washing powder brands Ariel and Tide, shampoo brands Heads & Shoulders and Pantene, as well as shaving and dental hygiene brands Gillette and Oral-B. It also manufactures products under the brand name Ambi Pur, Pampers, Vicks and sanitary napkin Whisper.

The Directorate General of Anti profiteering (DGAP) investigated the books of accounts of P&G India based on a complaint filed before the standing committee, and concluded that the consumer goods manufacturer has not lowered prices of certain products despite the reduction in the tax rate.

However, P&G has denied any wrongdoing. "As a responsible corporate, P&G has always been committed to passing the net benefit of GST rate reduction to the consumers. We have passed the net benefit and communicated the same via advertising in mass media to help increase awareness with the consumers, shoppers and retailers," said a spokesperson.

According to the news agency, P&G has been issued a notice to submit its reply on April 29 and explain why action should not be taken against it. The source added that the National Anti-Profiteering Authority (NAA) will pass a final order in the next three months. P&G, of course, will have the option to challenge this order in the courts.

In December, the GST council had again reduced the tax rates on 23 goods and services. For instance, the tax rates on TV and monitor screens up to 32 inches were slashed from from 28% to 18%. The DGAP has reportedly served notice to Samsung India for not passing on the benefits of this tax cut to its customers.

But the Korean company had also said that it had acted in accordance with the rules. "Samsung reduced its sales price according to GST reduction with effect from January 1, 2019. We are cooperating with DGAP on this matter," the company said in a statement.

US healthcare giant J&J's India arm is similarly being investigated by the authorities for not reducing prices of products that saw a reduction in GST rates. "J&J, the makers of Stayfree and Carefree [sanitary] napkins, profiteered from around Rs 40 crore from the tax cuts announced by the government," sources in the know told DNA, quoting a DGAP report. The government exempted sanitary napkins from the goods and services tax GST rates on sanitary napkins with effect from July 7, 2018 - it fell in the 12% tax bracket previously. "The matter is currently under adjudication and we continue to work closely with the authorities to address any queries that they may have on the subject," a J&J spokeswoman said.

Once a profiteering complaint is received against a company, the DGAP has the powers to look into the books of accounts and see if the benefits of tax rate cuts have been passed on in other products manufactured by the company as well. After studying the documents, the DGAP submits its report to the NAA for further action.

If the latter finds a firm guilty of profiteering then the amount profiteered has to be refunded to consumers by the company. In case where the consumers cannot be identified, the amount reportedly has to be deposited into the consumer welfare fund of the Centre and states.

In January, Minister of State for Finance Shiv Pratap Shukla informed the Parliament that the NAA had received 80 investigation reports from the DGAP, from which final orders have been issued in 29 cases. According to him, nine businesses were found to have not passed in rate cut benefits to the tune of Rs 559.88 crore to consumers.

Edited by Sushmita Choudhury Agarwal

(With PTI inputs)

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