Likely to make fresh representation to govt: Cos look for clarity on anti-profiteering rules

NEW DELHI: India Inc is planning to approach the Centre, after the re-election of the Narendra Modi-led NDA government, for further clarity on the anti-profiteering framework that has become important in the production landscape after New Delhi brought in a uniform producer levy.

Companies are planning to make fresh representations for clear guidelines and regulations to be framed on profiteering, seeking avoid ambiguity whether manufacturers have passed on the Goods and Services Tax (GST) benefits to consumers in lockstep with tax cuts, officials aware of the developments said.

“In our various interactions with the regulatory authorities, we have been seeking clear rules and guidelines on anti-profiteering,” said a spokesperson for the country's biggest consumer goods maker Hindustan Unilever ( HUL).


The NAA has passed orders against several companies following profiteering complaints. They include HUL (Rs 462 crore), Nestle (Rs 100 crore), Procter & Gamble (Rs 250 crore), Domino’s franchisee Jubilant FoodWorks Ltd (Rs 41.4 crore) and McDonald’s franchisee Hardcastle Restaurants (Rs 7.49 crore).

The Directorate General of Anti-profiteering has charged the companies with profiteering from the reduction in goods and services tax by not passing on the benefits entirely to consumers. The companies have said they passed on benefits of lower taxes either by lowering prices or increasing the grammage of products.

A spokesperson for Nestle India said the company has passed on GST benefits to consumers. “We are hopeful that the procedure followed to pass on the GST benefit will be appreciated by the National Anti-Profiteering Authority and our stand will be vindicated,” the spokesperson for the Indian arm of the Swiss foods major said. “While we haven’t made any fresh representations, any measures towards greater clarity on rules and regulations with respect to anti-profiteering are always welcome,” the spokesperson added.

The Nestle spokesperson said in situations where the benefit could not be passed on instantly by reduction in prices or increase in grammage, it had set aside Rs 16.6 crore to be subsequently passed on and the amount was not recognized either in sales or in profit. The money has been deposited in the government’s consumer welfare fund.

“While the intention behind this provision is understood, industry has been asking for guidelines as to how the benefits can be said to be 'passed on',” said Pratik Jain, national leader, indirect tax, PwC. “Now with possibility of further rate rationalisation (for example the merger of 12 and 18% rates), sectors such as real estate coming within the ambit and number of disputes already in courts, the GST council should look at coming up with guidelines as soon as possible.”

Jain added that the possibility of the mechanism getting restricted only to complaints filed by consumers and not by third parties including government officials, should be explored to minimise such disputes, while still preserving it to be a consumer protection measure.

Email queries to P&G and Jubilant FoodWorks elicited no response.

After the GST roll out in July 2017, in November the same year, the GST Council reduced tax slabs from 28% to 18% across 200 product categories including shampoo, detergent, cosmetics, chocolates, toothpaste and washing powder.

ET had reported in its May 16 edition that the anti-profiteering framework is likely to get an extension for another two years, following more likely changes to the GST structure.