GST Probe Unit Accuses L’Oréal India Of Making Rs 215-Crore Undue Profit

The indirect tax anti-profiteering unit has accused cosmetics maker L’Oréal India of making undue profit worth Rs 215 crore, according to a person aware of the development.

The Directorate General of Anti-Profiteering alleged that the company didn’t pass on the benefit of a reduced Goods and Services Tax rate on a range of products, the person said on the condition of anonymity as the information is not public yet. The company didn’t cut prices of shampoos and make-up products after the GST was lowered to 18 percent from 28 percent, the person said citing the agency’s findings.

In December, the National Anti-Profiteering Authority had found a distributor of L’Oréal India guilty of profiteering by not passing the GST rate cut on hair colour to customers, and imposed a Rs 3.4-lakh penalty. It then widened the investigation to find out if the company had lowered the prices.

A spokesperson for L’Oréal India, which sells L’Oréal, Garnier, and Maybelline branded products, told BloombergQuint that the company has taken appropriate measures to pass the benefit of GST rate cut to customers. “We are in dialogue with the National Anti-Profiteering Authorities to fully understand their calculations and address any queries they may have. We hope they will duly consider the merit of the methodology adopted by L’Oréal India and take a fair view of the matter.”

The anti-profiteering unit has accused other consumer goods makers, including Patanjali Ayurved Ltd., Procter & Gamble Company, ITC Ltd., among others, of not passing on the benefit of lower tax rate to consumers.

The cases are pending with the GST anti-profiteering authority.

The anti-profiteering authority had in December last year ruled that Hindustan Unilever Ltd. had made undue profit of about Rs 535 crore against the company’s claim of Rs 160 crore. India’s largest consumer goods maker challenged the move in the Delhi High Court, which stayed the demand.