GST anti-profiteering authority slaps Rs 90 cr penalty on Nestle; finds company failed to pass on rate cut benefits to consumers

Nestle suffered a major setback after the National Anti-profiteering Authority (NAA) found that the fast-moving consumer goods (FMCG) giant did not pass on the GST rate cut benefits to consumers, said news reports. The NAA found that the methodology adopted by Nestle to pass on the Goods and Services Tax (GST) rate reduction benefit was ‘illogical, arbitrary, and illegal and imposed a penalty of Rs 90 crore on the company, said report in Business Standard. The company has been given three months time to comply. [caption id=“attachment_2973304” align=“alignleft” width=“380”] Suresh Narayanan, CMD, Nestle India. Reuters[/caption] Last year, Nestle had voluntarily deposited Rs 16 crore in the fund meant for the consumer welfare and now it will have to deposit Rs 73 crore within the next three months, the report said. The company, however, said that it is a responsible corporate citizen and passed on the benefits to the consumers. “Nestle India as a responsible corporate citizen has passed on the benefits of GST to consumers and will consider appropriate actions after studying the order by the NAA. It further said that the benefits largely have been passed on by way of reduction of MRP or by way of increase in grammage,” the company was quoted as saying in the report. The authority said that the narration of facts established the fact that the company denied the tax reduction benefits to the customers and it was a contravention of the law, said a report in The Hindu Business Line. Nestle, the maker of Maggi, KitKat, Munch, and Nescafe, has been facing allegations of profiteering after the rate of GST was lowered on over 175 products from 15 November 2017. It was alleged that the company did not pass the benefit of rate reductions to the consumers, the report said. The NAA also directed Nestle to reduce the prices ‘commensurately’ and authorised the Director General Anti-Profiteering (DGAP) to issue a show-cause notice seeking an explanation from the company on why the penalty should not be applied, said a report in The Economic Times. In October last year, an investigation by the DGAP had found that Nestle indulged in profiteering of about Rs 100 crore by not passing on GST rate cut benefit to consumers. The DGAP, which had submitted its report to the NAA, had then conducted the investigation on a wide range of products of Nestle India and found that the company had not reduced prices of certain products in proportion to the cut in GST rate. As per the structure of the anti-profiteering mechanism in the GST regime, complaints of local nature will be first sent to the state-level ‘screening committee’, while those of the national level will be marked for the ‘standing committee’. If the complaints have merit, the committees refer them to the DGAP. — With PTI inputs