HUL asks for clarity on anti-profiteering after receiving repeated notices

CMD Sanjiv Mehta said it would be beneficial to all if rules were spelt out by Centre

Hindustan Unilever (HUL), the country’s largest consumer goods company, has pressed for a clear set of anti-profiteering rules — the first time it has done so since receiving repeated notices in this respect.
 

The call comes as HUL grapples with the issue of its “portfolio” approach, by which a combination of price and grammage changes was undertaken by it to pass on goods and services tax (GST) benefits to consumers, has not been accepted by the Directorate General (DG) of Anti-Profiteering, an investigation arm of the revenue department.

Speaking at a post-results press conference on Friday, HUL Chairman and Managing Director Sanjiv Mehta said it would be beneficial to all if the government laid out clear anti-profiteering norms.

“It would help if the taxman were to lay down the rules ahead of the game rather than leaving it for interpretation after the game has been played. That brings in unnecessary complexity,” Mehta said.

“We have gone by the spirit of the law in the absence of set rules. And whatever is the net benefit accruing under the GST has been passed to consumers,” he said.

It may be recalled that the DG of Anti-Profiteering (earlier called Directorate General of Safeguards or DGS) had slapped a Rs 4.95-billion notice on HUL last month, citing benefits that had not been passed in the wake of a GST rate cut in November last year.

This had come in addition to a notice that had been slapped on the company (in January 2018) by the DG of Anti-Profiteering, citing the same.

At that time, HUL had said it remained committed to passing on all benefits under the GST to consumers and it was ascertaining the details of the notice. The company subsequently offered to pay the government Rs 1.6 billion (including Rs360 million on behalf of its redistribution stockists), which was deposited with the consumer welfare fund of the government.

On Friday, Mehta said the government had accepted this amount and that the company remained transparent in the matter. “We have shared how we have gone about implementing the changes following the rate rationalisation under the GST. This has been through a combination of price reduction and grammage increase, given that we have different pack sizes. It is impossible to reduce the price of a Rs 1 sachet. So, we have done our best to explain to the National Anti-Profiteering Authority (which is hearing the case) why this has been done and we are awaiting the final order,” Mehta said.

While the NAA is expected to give its ruling on the matter shortly, industry executives concur with HUL that it is impossible to touch the prices of sachets because it would create an issue in terms of weights and measures. 

“The DG of Anti-Profiteering expects every stock-keeping unit to see a reduction in price following a GST rate reduction. This is difficult to do for sachets and low unit packs, which are available for Rs1 and below. Touching price of these items would mean a run-in with the legal metrology department, which companies are not ready to do,” the chief executive officer of a top consumer goods company said.

Experts said the HUL matter, being heard by the NAA, was expected to clear the air on the crucial issue of grammage increase as a measure to pass on GST benefits to consumers on small packs and sachets, where price changes are not possible to implement.

TIMELINE OF A CONFLICT

2017

Nov 10: GST Council slashes rates on 178 daily-use items, from 28% to 18% 
 

Nov 15: FMCG firms, including HUL, implement the changes
 

2018
 

Jan 16: HUL is slapped with anti-profiteering notice by Directorate General of Anti-Profiteering
 

Jan 17: HUL discloses Rs 1.19 bn as GST benefits that were not passed to consumers during Nov, Dec 2017; offers to deposit in consumer welfare fund
 

Mar 14: HUL offers another tranche of Rs360 mn for Jan; total touches Rs 1.55 bn
 

Aug 14: HUL’s disclosure and deposit of money for GST benefits not passed to consumers touches Rs1.6 bn
 

Sep 7: HUL slapped with a new anti-profiteering notice to the tune of Rs4.95 bn; matter in front of NAA
 

Sep 14: HUL seeks further time; NAA grants time till Sept 24
 

Oct 12: HUL says it has made all submissions; awaiting final order