HUL waited for neither; it did the calculation on its own and, in effect, told the government it was penalising itself
The central government has been taken aback by consumer goods major Hindustan Unilever’s (HUL) offer of Rs 1.19 billion in two tranches for not having passed on goods and services tax (GST) cut benefits to customers.HUL is actually in the process of offering another tranche as well but is still awaiting instructions on how to deposit the allegedly profiteered sum in the consumer welfare fund.According to officials, the current guidelines allow the government to accept penalties in the said fund after an investigation by Directorate General of Safeguards (DGS) and then an order from the anti-profiteering authority. However, HUL waited for neither; it did the calculation on its own and, in effect, told the government it was penalising itself.“What do we do in case of suo motu action?” asked a government officer. What the DGS has done is to officially launch an investigation. Which has asked HUL to give it the details of the method used to calculate the amount. Thereafter, the anti-profiteering authority will apparently have to issue an order to accept the payment as penalty.“In the absence of clear legal provisions on this subject, officials had forwarded our request to DGS. We are awaiting advice from the officials, so that we can deposit the cheques at the earliest,” HUL told Business Standard in response to a query.
The problem in hand
- HUL offered Rs 1.19 bn in two tranches for not passing on GST benefits to customers
- HUL is still awaiting instructions on how to deposit the sum in the consumer welfare fund
- DGS has officially launched an investigation. Which has asked HUL to give the details of the method used to calculate the amount
- The CBEC apparently cannot accept the offered cheques as this cannot be considered part of govt revenue
- It checked the law and was told revenue cannot be any collection in excess of the tax rate
The company had suggested it deposit money on a monthly basis for the benefits which have accrued to it and which need to be passed on to consumers until the transition is completed. “Or till we hear from the government, suggesting a different course of action,” said HUL.The Central Board of Excise and Customs (CBEC) apparently cannot accept the offered cheques as this cannot be considered part of government revenue.It checked the law and was told revenue cannot be any collection in excess of the tax rate.“GST law envisages deposit to the consumer welfare fund only after investigation is done and an order is passed by the Authority. There has to be a process outlined for suo motu acceptance or an investigation would need to be carried out,” said Pratik Jain, partner at consultants PwC India.The anti-profiteering rules suggest that if the eligible person (i.e the buyer) does not claim the return or the person is unidentifiable, the amount must be deposited to the fund.The GST Council had reduced rates for 200-odd items of common use on November 10. This took effect from November 15.DGS, investigative arm of the anti-profiteering authority, has sent notices to Pyramid Infratech, Honda Motor Vehicles, Lifestyle International and Hardcastle Restaurants (master franchisee of eatery chain McDonald’s) for allegedly not passing on GST benefits to the final consumer. It had asked these entities to provide their balance sheets, trial balance and profit and loss accounts for the past year. The anti-profiteering mechanism is a three-stage process.There are state-level screening committees for local complaints and a standing committee for national-level complaints. And, investigation by DGS.