DGAP finds Nestle profiteered Rs 1 bn, company deposits Rs 165 mn in fund

The GST anti-profiteering body probed a complaint against Nestle for not cutting prices of its products

A probe by the goods and services tax (GST) anti-profiteering agency has found that Nestlé India has profiteered about Rs 1 billion by not passing on the GST rate cut benefit to consumers and the FMCG major has on its own deposited Rs 165 million in the consumer welfare fund.

The Directorate General of Anti-Profiteering (DGAP) has submitted its report to the National Anti-Profiteering Authority (NAA), in which it has concluded that Nestlé India had not reduced prices of certain products in proportion to the cut in the GST rate, an official said.

A Nestlé India spokesperson said the company had suo motu deposited Rs 165 million in the Consumer Welfare Fund taking into account cases where it could not pass on the tax rate cut benefits to consumers.

"We wish to reiterate that in situations where the benefit could not be passed on instantly by reduction in Maximum Retail Price or increase in grammage, the amount of Rs 165 million was set aside to be subsequently passed on and was not reckoned either in sales or in profit.

"At our request, the authority through its communication had advised us to provisionally deposit the amount computed by us, suo motu, in the Consumer Welfare Fund, which has been done," Nestlé India said.

Nestlé India manufactures most popular instant noodles brand Maggi, coffee brand Nescafe, chocolates such as Kitkat, Munch, Milkybar. It also manufactures milk products, and tomato ketchups.

According to the provisions of GST law, a Consumer Welfare Fund has been set up wherein undue benefits made by businesses due to tax rate cut have to be deposited in cases where it could not be passed on to identified consumers.

The GST anti-profiteering body probed a complaint against Nestlé for not cutting prices of its products, despite a reduction in tax rates by the GST Council in variety of items with effect from November 15, last year.

The council had cut rates on 178 products, including chocolates, malt extract and food preparations of flour, starch or malt extract, Waffles and wafers coated with chocolate or containing chocolate, and extract, essence and concentrates of coffee, miscellaneous food preparations.

“Once a profiteering complaint is received against a company, the DGAP has the powers to look into the books of accounts and see if the benefits of tax rate cuts have been passed on in other products manufactured by the company as well. The DGAP has found profiteering to the tune of Rs 1 billion in the case of Nestlé India," an official said.

Nestlé India, in an e-mailed response, said as a responsible corporate citizen, it has passed on the benefits of GST to consumers.

“We are hopeful that the procedure followed to pass on the GST benefit will be appreciated by the National Anti-Profiteering Authority and our stand will be vindicated," the Nestlé India spokesperson had said earlier in the day.

The spokesperson said that Nestlé, along with many other industry members, have been requesting the government for clear rules and regulations to be framed on anti-profiteering to avoid any confusion and ambiguity.

"This will support ease of doing business".