GST anti-profiteering authority imposes Rs 90-cr penalty on Nestle India
13 December 2019
The National Anti-profiteering Authority (NAA) has imposed a penalty of Rs90 crore on consumer goods major Nestle India for not passing on the gains from the reduction in the Goods and Services Tax (GST) rate to consumers by ‘commensurately’ reducing prices of its products.
The NAA has directed Nestle India to pass on the gains from the reduction in the GST to consumers and authorised that the Director General Anti-Profiteering (DGAP) to issue a showcause notice asking reasons why the fine should not be imposed.
Nestle, the maker of Maggi noodles, Nescafe coffee and KitKat chocolates, has to deposit Rs73.14 crore out of Rs89.73 crore of profiteering as the remaining amount has already been deposited in the consumer welfare fund last year. The authority said that the balance amount, along with an 18 per cent tax, be deposited within the next three months in the consumer welfare funds of central and state governments.
The authority has questioned the methodology used by Nestle to pass on tax cut benefits, saying it was “illogical, arbitrary, and illegal, which has resulted in unfairness and inequality while passing on the benefit of tax reduction."
“It is evident from the narration of facts that the respondent has denied the benefit of tax reduction to the customers in contravention of the provisions of the Section 171(1) of the CGST Act, and has thus profiteered. Therefore, he’s liable for imposition of the penalty,” the authority said in its order.
“Accordingly, the respondent is directed to reduce its prices commensurately in terms of Rules 133(3),” the authority mentioned, saying that a showcause notice be issued.
“Nestle India as a responsible corporate citizen has passed on the benefits of GST to consumers and will consider appropriate actions post studying the order by NAA," a news agency report quoted a Nestle spokesperson as saying in an email statement.