Nestle India Accused Of Making Rs 90 Crore Undue Profit By Not Passing On GST Rate Cut Benefits
Nestle brand Nescafe coffee seen in a supermarket (Photographer: Adrian Moser/Bloomberg)

Nestle India Accused Of Making Rs 90 Crore Undue Profit By Not Passing On GST Rate Cut Benefits

The National Anti-Profiteering Authority has accused Nestle India Ltd. of making undue profits to the extent of Rs 89.73 crore by not passing the benefits of a reduced goods and services tax rate on its products to consumers.

After GST rate cuts were announced on several items on Nov. 15, 2017, and Jan. 25, 2018, the consumer goods maker made unjust profits on chocolate products, instant noodles and pasta, wafer chocolates, instant coffee products, curry paste, among others, that it makes under the brand names Nescafe, Maggi and Kitkat, the authority said in an order on its website. The probe was conducted by the Directorate General of Anti-Profiteering between Nov. 15, 2017 and June 30, 2018.

Nestle India has already deposited Rs 16.58 crore in Consumer Welfare Fund under the Department of Consumer Affairs and will now have to pay the remaining Rs 73.14 crore with interest. The authority has also asked the company to explain why a penalty shouldn’t be further imposed on it.

Nestle India has said it has passed on the benefit of GST rate cut to consumers and will consider appropriate actions after studying the order. “In the absence of specific rules or regulations on profiteering, for rate changes effective Nov. 15, 2017, and Jan. 25, 2018, impacting our products, Nestlé India adopted the spirit of GST law, by adopting a reasonable, pragmatic and market sustainable approach to pass commensurate GST rate reduction benefits,” the company said in a statement. “With this as the underlying spirit, Nestlé India approached NAA, to clarify on the methodology to be followed and in turn explained our methodology.”

The order also states that Nestle India didn’t adhere to the government’s directive of pasting an additional sticker stating the new maximum retail price besides the old maximum retail price of products whose price reduced after GST’s implementation, and later.

Since MRPs weren’t reduced and affixed on stock-keeping units by the company, there’s no likelihood of products being sold to consumers at reduced prices after GST rate cuts, the order said.

To this, Nestle India said that the “benefits largely have been passed on by way of reduction of Maximum Retail Price or by way of increase in grammage”. “Further, on stock-keeping units where it was not practicable to pass on the benefits, say for example NESCAFE single-serve packs for Rs 2 or MAGGI Noodles Rs 5 packs, the benefit has been passed on other pack sizes within the same product category.”

The authority also called Nestle India’s attempt to pass the benefits of rate reduction to customers as “arbitrary, inequitable and illegal”, and non-acceptable. The company had informed the authority that since it couldn’t pass the benefit of GST rate cuts on Rs 5 packs of Maggi noodles and pasta, it passed more benefit to consumers on packs of Rs 12 by reducing its price to Rs 11.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.