MNCs in India accused of not passing on benefits from tax cuts: Report

The companies had to pass on the benefits to customers after the government reduced GST to 18 per cent from 28 per cent, and to 5 per cent from 12 per cent on many products

Indian tax authorities have alleged that a number of big multinational companies have not passed on benefits from a tax cut to customers, a senior government official told Reuters.

The official said, for example, that the tax authorities have alleged that US consumer goods maker Procter & Gamble did not pass on more than $35 million in tax benefits which were meant to have gone to its customers.

Separately, the authorities are also investigating South Korea's Samsung Electronics and US drug maker Johnson & Johnson among others, the senior government official, speaking on condition of anonymity, said.

P&G, Samsung and J&J all deny any wrongdoing.

National Anti-Profiteering Authority - a quasi-judicial body set up following the rollout of the Goods and Services Tax in 2017, found P&G had not reduced prices on many products after a tax cut on those items, the official said.

In a statement, P&G said: "As a responsible corporate, P&G has always been committed to passing the net benefit of GST rate reduction to the consumers." P&G said it had passed on the rollbacks and communicated this via advertising in mass media.

Samsung also said it had acted in accordance with the rules.

"Samsung reduced its sales price according to GST (Goods and Services Tax) reduction with effect from January 1, 2019. We are cooperating with DGAP (Directorate General of Anti Profiteering) on this matter," the company said in a statement.

A J&J spokeswoman said via email that the company had passed on all benefits to customers, after the government exempted sanitary napkins from the goods and services tax.

"The matter is currently under adjudication and we continue to work closely with the authorities to address any queries that they may have on the subject," the spokeswoman said.

Under the law, companies had to pass on the benefits to customers after the government reduced GST to 18 per cent from 28 per cent, and to 5 per cent from 12 per cent on many products.

The government also exempted some goods that had earlier been taxed.

"P&G has been issued a notice to submit its reply on April 29 and explain why action should not be taken against it," the official, with direct knowledge of the inquiry, said. The official added that the authority would pass a final order in the next three months.

After an initial investigation, companies are given an opportunity to defend themselves before the authority passes a final order, which can be challenged in the higher courts.

What’s the matter

• The authorities are probing Samsung Electronics and Johnson & Johnson among others
• Officials allege that P&G did not pass on more than $35 million in tax benefits
• P&G denies any wrongdoing, saying it has been committed to passing the net benefit of GST rate reduction 
• Samsung says it has acted in accordance with the rules 
• J&J says it has passed on benefits to customers, after the government exempted sanitary napkins from GST