India is in the process of depositing a transition amount in the consumer welfare fund for not immediately passing on benefits under the goods and services tax (GST), the latest in a line of companies including Hindustan Unilever that have been making such payments after the National Anti-profiteering Authority called on them to do so. Nestle didn’t give details of the amount involved.
In November last year, GST on 178 daily use products including chocolates and cocoa-based products was slashed to 18% from 28% as the government sought to ease the burden on consumers hit by price increases on account of the new tax regime. The government had pushed companies to reduce prices in line with the cuts and ensure the benefits of the move were passed on to consumers.
Nestle said it had made sure to exclude such amounts from its accounting. “In situations where the benefit could not be passed on instantly by reduction in MRP (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,” a Nestle spokesperson said in an email.
The Directorate General of Safeguards (DGS), which has been entrusted with looking into anti-profiteering matters, has been calling on companies that didn’t immediately pass on the benefits of lower GST to do so. In the event that this wasn’t possible on account of stocks having already entered the retail channel with older, higher price tags, companies are required to pay the difference to the central fund.
The Nestle spokesperson said it hadn’t received any notice from the anti-profit .
“At our request, the authority through its communication has advised us to provisionally deposit the amount computed by us, suo moto, in the consumer welfare fund to be constituted under central GST and furnish the necessary documents,” the spokesperson said. “While we were in the process of taking the next steps to pass on the benefits to consumers, we had a discussion with National Anti-profiteering Authority, which was constructive and we decided to deposit, suo moto, the amount which was set aside.
The maker of KitKat chocolates, Nescafe coffee and Maggi noodles said the company has taken appropriate measures to pass on the benefits of lower GST to consumers.