Colgate in a spot as distributors set to halt product buys in Maharashtra

Co in a bind over issuing credit notes without GST and offering deep discounts to quick commerce platforms, as distributors threaten a nationwide suspension

Oral-care major Colgate Palmolive (India) is in a spot in Maharashtra, where its distributors have decided to suspend purchase of all its products starting May 12 over issuance of trade credit notes without applying corresponding GST, and steep discounts the firm has been offering to quick-commerce (qcom) channels.

 

The company’s distributors, under the umbrella of All India Consumer Products Distributors Federation (AICPDF) — a trade body representing distributors of fast-moving consumer goods (FMCG) — will suspend all purchases from the oral-care major from May 12 in general trade.

 

AICPDF said in its statement that distributors had received showcause notices and tax-recovery orders, putting them at legal risks. It also said the liability had shifted to the trade partners. It also said that while the suspension was at a state level, it would also escalate into a nationwide campaign. An email query sent to Colgate Palmolive (India) had not elicited a response by press time.

 

AICPDF said Colgate Palmolive distributors under its umbrella had received GST notices demanding about Rs 200 crore.

 

This issue started two years ago, when the company issued trade credit notes to its distributors without the corresponding GST, putting the burden of the tax payout, interest and penalties for the said credit notes on the distributors of Colgate Palmolive India.

 

On the qcom issue, the distributor’s body said the company was aggressively pushing stock into qcom leading to deep discounts to the tune of 50-60 per cent for the consumer. These discounts offered to the consumer bring the product price down even below the purchasing price of distributors and retailers.

 

“Moreover, field sales executives are being demotivated by incentive losses, as their targets become unattainable amid falling volumes. This has triggered high attrition, further compromising the last-mile service backbone Colgate once relied upon,” AICPDF said in its statement. It added that general trade volumes had dropped by more than 50 per cent in many districts.

 

The distributors federation has also been fighting qcom companies and has filed a petition with the Competition Commission of India (CCI) against leading qcom platforms in March.

 

In its petition it alleged that qcom companies were indulging in practices of deep discounts and exclusive supply/distribution agreements, thereby engaging in unfair pricing and affecting the competition in the market for selling consumer goods.     

DISTRIBUTOR FEDERATION’S CLAIMS

  - Distributors received showcause notices, tax recovery orders putting them at legal risk

  - They received GST notices demanding about ₹200 crore

  - Company aggressively pushing stock into quick commerce