Packages of Hindustan Unilever Ltd. Surf excel laundry detergent are displayed for sale at a store in Mumbai. (Photographer: Kuni Takahashi/Bloomberg)

HUL Case: Higher Grammage Vs Lower Prices - How To Pass GST Benefit?

Hindustan Unilever Ltd. said the Directorate General of Safeguards didn’t agree with the practice of increasing the weight of a pack instead of lowering prices to pass on the benefit of lower goods and services tax rate.

“(Passing the GST benefits through increased grammage) is an item, which the Directorate General hasn’t agreed to at this stage,” Srinivas Pathak, chief financial officer at HUL, in a press conference announcing the company’s quarterly earnings. “We’re in consultation with the National Anti-Profiteering Authority.”

HUL had said it voluntarily deposited Rs 160 crore with Consumer Safeguard Fund under the authority as it couldn’t reduce maximum retail price on products in the supply chain after the GST Council reduced rates in November. The directorate found the profiteered amount to be more than Rs 300 crore, the Economic Times reported in September.

The Directorate General of Safeguards, an investigating arm under the Finance Ministry, has submitted its report on HUL to the anti-profiteering authority, Pathak said. He said the company has explained that increase in grammage is a standard industry practice, especially with packs priced at Rs 2, 5 or 10. He expressed hope the company’s view will be considered before the authority passed its order.

Sanjiv Mehta, chairman and managing director of HUL, said the government should lay down rules on for easier implementation.