Government gets stricter on companies not passing down GST benefits to consumers

By Ridhima Malhotra

The Government has approved the constitution of a National Anti-Profiteering Authority (NAA) – the institutional mechanism under the GST law to check any unfair profit-making activities by the trading community.  The Authority’s primary function is to ensure that the benefits of the reduction in GST rates on goods or services made by the GST Council is passed on to the ultimate consumers by way of a reduction in prices by traders. 

Recently, FMCG firm Hindustan Unilever Ltd (HUL) was served a notice by the Directorate General of Safe guards (DGS) for reportedly not passing on the benefits of the new tax regime to the consumers. DGS has also sent notices under GST anti-profiteering to enterprises including Hardcastle Restaurants, which runs McDonald's restaurants in west and south India, Lifestyle International, Honda Motor and an HULBSE -1.04 % dealer in Jaipur.GST council has also dropped tax rates on 200 products including chocolates, toothpaste, shampoo, washing powder and shaving creams. The tax rates have been reduced from 28% to 18% to help consumers. The government expects traders to release advertisements spreading awareness to the consumers about revised prices to building new software to keep a close eye on billing and invoicing at retail stores.

“We have accelerated our networks covering more than 800 stock-keeping units (SKUs) to reduce prices and increase grammage in case of price point packs and most of these have already landed in the market. List of key SKUs with lower prices and increased grammages is available on our website. In addition, HUL has also been communicating the price reductions or increased grammages through advertisements in more than 10 languages,” said the company spokesperson.

If the Directorate General of Safeguards (DGS) finds a business blameworthy of profiteering, the NAA can order it to decrease costs or return the consumer the amount of tax benefit not passed on. It would be mandatory for a profiteering business to pay 18% of interest on the tax reduction not passed on to consumers. Punitive action could be taken the default may cost a business its registration.