Why HUL, Nestle gave Rs 175 crore to govt's consumer welfare fund

The deposit has been made on account of the rate reductions approved by the GST Council in its November.
The rate was reduced on items including shampoo, detergents, chocolates, beauty products, sanitary ware, leather clothing, cookers, stoves, after-shave, deodorant, detergent and washing power.
Companies found it difficult to pass on the benefits to consumers immediately at the time of GST rate reduction owing to logistical issues.

The government’s consumer welfare fund has earned Rs 175  crore so far on account of Hindustan Unilever (HUL) and Nestlé giving voluntary deposits as a compensatory measure for not passing on to customers the benefits of cuts in the Goods and Services Tax (GST).

These are provisional deposits, and the anti-profiteering watchdog will arrive at the final amount after examining each case.

The deposit has been made on account of the rate reductions approved by the GST Council in its November 10 meeting last year in Guwahati, where the rates for 178 items were cut from 28 per cent to 18 per cent.

“Companies have voluntarily come forward to provisionally deposit the profiteered amount in the consumer welfare fund. Rs 175 crore has been deposited to date. The authorities concerned are examining the cases and the final amount will be determined after that,” said a government official.

HUL has deposited Rs 160 crore, while Nestlé has deposited Rs 15 crore.

According to HUL, it has deposited the profiteered amount. Nestlé is learnt to be in the process of depositing another tranche of rate benefits.

The National Anti-Profiteering Authority (NAA) is examining the HUL case and an order is expected soon.

The directorate general (DG), anti-profiteering, is looking at the Nestlé case.

The rate was reduced on items including shampoo, detergents, chocolates, beauty products, sanitary ware, leather clothing, cookers, stoves, after-shave, deodorant, detergent and washing power. These changes came into effect on November 15.

Companies found it difficult to pass on the benefits to consumers immediately at the time of GST rate reduction owing to logistical issues.

Hence, HUL and Nestlé preferred to deposit that sum with the consumer fund.

“HUL had suo motu offered to deposit the benefit accrued to the company during the transition phase of landing the new networks in the marketplace.

"The government subsequently had asked the company to provisionally deposit the amount. Accordingly, a sum of Rs 160 crore was deposited in the Consumer Welfare Fund in June,” said the HUL spokesperson.

For the new stocks, the benefit was passed on to end consumers through reduction in minimum retail prices in some packs whereas in the case of low-value/price-point packs it passed on the benefits through higher grammage/ml.

For instance, the company increased grammage on Wheel (Rs 10) from 170 gm to 180 gm; Vim Bar (Rs 10) from 150 gm to 165 gm; Bru Instant Coffee (Rs 10) from 8 gm to 10 gm; Sunsilk (Rs 50) shampoo bottles from 80 ml to 90 ml etc.

A Nestlé spokesperson said: “On our request, the authority, through its communication, has advised us to provisionally deposit the amount computed by us, suo motu, in the Consumer Welfare Fund to be constituted under the Central Goods and Services tax and furnish the necessary documents.”

The food and beverage major has said it has taken measures to pass on commensurate GST benefits to consumers and will continue to do so.

“In situations where the benefit could not be passed on instantly, the amount was set aside to be subsequently passed on and was not reckoned either in sales or in profits,” the spokesperson added.

The anti-profiteering mechanism is a three-stage process. There is a state-level screening committee for local complaints and a standing committee for national-level complaints.

Then, there is investigation by the directorate general of Anti-Profiteering and then a probe by the decision-making body, the NAA.

The NAA is looking at nine cases and will issue orders on those in the coming weeks.

About 30 cases are with the DG anti-profiteering, 31 with the standing committee and 57 with screening committees.

Photograph: Rupak De Chowdhuri/Reuters