The Director General of Anti-Profiteering (DGAP) has charged the fast
moving consumer goods (FMCG) major Nestle with profiteering. The
company has been found to have deprived its customers of goods and
services tax (GST) cuts of Rs 98 crore by not revising the prices of
chocolates, baby food items and Maggi noodles among other products in
line with the new rates, sources said. The
DGAP last week submitted the
investigation report to the National Anti-Profiteering Authority (NAA),
the apex anti-profiteering body functioning under Ministry of Finance.
The NAA will now hear the parties and come up with a final order in
three months.
“The investigation reveals that the company did not pass on
the benefits of the tax cuts to consumers by way of commensurate
reduction in the prices of over 300 products,” a source said. The GST
Council had reduced the rates on a large number of confectionery and
FMCG items by as high as 10% in November, 2017, and January this year,
respectively.
Nestle products where the prices were not brought down in line with
the GST rate cuts include KitKat, Milky Bar, Cerelac, Nan, Nescafe,
Nestea and Maggi noodles among others across the food, confectionery,
dairy and nutrition portfolio, as per sources. “In many cases, the
prices were not reduced uniformly across all packet sizes. For example,
the benefit accrued on a small packet was passed on to consumer by
reducing the price of the bigger packet in the same category of
product,” a source said.
As per rule 171 of the Central GST Act (CGST), 2017, any reduction in
rate of tax on any supply of goods or services or the benefit of input
tax credit shall be passed on to the recipient by way of commensurate
reduction in prices.
“While the company had taken appropriate measures to pass on
commensurate benefits to our consumers, in situations where the benefit
could not be passed on instantly by reduction in maximum retail price or
increase in grammage, the amount was set aside to be subsequently
passed on and was not reckoned either in sales or in profit,” Nestle
India spokesperson said in an e-mail reply.
The anti-profiteering watchdog had ordered the probe in May after Nestle
admitted to having accrued gains post rate cuts. Earlier, the company
had voluntarily offered to deposit a sum of Rs 15 crore as a
compensatory measure for not passing on the benefits to consumers
immediately at the time of GST rate reduction. The amount was deposited
in the Consumer Welfare Fund. “While we were in the process of taking
the next steps to pass on the benefits to consumers, we had a discussion
with the NAA, which was cordial and constructive and we decided to
deposit, suo moto, the amount which was set aside,” the company
spokesperson said.