Nestle India fined Rs 90-cr for not passing on GST rate cut benefit to consumers

New Delhi: The National Anti-profiteering Authority (NAA), the statutory watchdog set up under Goods & Services (GST) regime to check the unfair profiteering activities by the registered suppliers, on Wednesday slapped a penalty of Rs 90 crore on FMCG giant Nestle for not passing on the benefit of rate reduction to consumers.

Nesle, the maker of packaged food brands such as Maggi, Kitkat and Nescafe among others, faced allegations of profiteering after rate of GST was lowered on over 175 products with effect from November 15, 2017. The company is alleged to have not passed the benefit of rate reductions to the consumers.

The NAA in its ruling said that the methodology adopted by Nestleto pass on GST rate-cut benefit was ‘illogical, arbitrary, and illegal, which has resulted in unfairness and inequality while passing on the benefit of tax reduction’.

According to the NAA held, the benefit of rate reduction was to be passed on for each stock keeping unit (SKU) and not at the product level. It observed that the benefit was either not passed on for some SKUs, while more than the required benefit was passed on in some SKUs within a category.

The NAA has asked the company to deposit Rs 73.14 out of Rs 89.73 crore of profiteering as remaining amount has already been deposited. the company deposited Rs 16.58 crore in the Consumer Welfare Fund. It was done after the Company request NAA which in turn advised the company to provisionally deposit the amount computed by it.

In a statement the company said that Nestlé India prides itself in being a responsible, responsive and fully compliant corporate citizen. “We have taken appropriate measures to pass on commensurate benefits of GST to our consumers In absence of specific rules or regulations on profiteering, for rate changes effective 15 Nov, 2017 & 25 Jan, 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. With this as the underlying spirit, Nestlé India approached NAA, to clarify on the methodology to be followed and in turn explained our methodology,” it said.

The Company claimed that the benefits largely have been passed on by way of reduction of Maximum Retail Price (MRP) or by way of increase in grammage. Further, on SKUs where it was not practicable to pass on the benefits, say for example NESCAFE single serve packs for INR 2/- or MAGGI Noodles INR 5/- packs, the benefit has been passed on other pack sizes within the same product category.