Reduced levies on some of the daily-use items means that India’s largest consumer goods maker Hindustan Unilever Ltd. paid lower taxes in the previous financial year.
HUL’s tax payments to state and central governments declined 21 percent to Rs 7,283 crore in the year through March, according to its annual report. That’s because the goods and services tax rate on soaps, shampoos, oral care and detergents was reduced to 18 percent from 28 percent in November.
“Effective taxes for products across industries has come down as a result,” HUL said in an email statement to BloombergQuint. The net benefits have been passed through to the consumer through reduced maximum retail prices or higher grammage, it said.
The company had in January received a notice from the anti-profiteering body for not passing on the benefits of lower GST rates to the consumer. HUL, however, said later that it had suo motu decided to set aside Rs 119 crore towards the consumer safeguard fund even before receiving the notice. The pool was created for companies to deposit profit generated from not passing on the GST benefit to consumers.
BloombergQuint had reported in November end that the consumer goods maker had not cut prices of its detergents even after the tax rates were lowered.
Litigation Provisions Jump
The other striking number in HUL’s balance sheet is a 63 percent year-on-year rise in provisioning at Rs 1,423 crore for the year ended March. That’s equivalent to 27.2 percent of its net profit for the period.
Kotak Institutional Equities said in its report this is the sharpest jump in provisions for many years – in absolute as well as percentage terms. Schedules suggest that a bulk of this increase is on account of higher provisions for “legal and other matters”, according to the brokerage.
Among the legal battles HUL fought in the previous financial year were against Amul over the frozen desserts advertisements and against its former employees in Nepal over data theft.
Also Read: Home Care Segment To Drive Growth For HUL
(Corrects an earlier version that quoted the company’s response out of context in the eighth paragraph, and incorrectly attributed it to the annual report)