NAA Accuses Nestlé India Of Making Undue Profit Of Rs 89 Crore By Not Passing On GST Rate Cut Gain To Its Customers

The National Anti-Profiteering Authority (NAA) has accused Nestlé India Ltd not passing the benefits of a reduced Goods and Services Tax (GST) rate on its products to its consumers and thus making undue profits to the extent of Rs 89.73 crore.

The NAA has also asked the company to explain why a penalty shouldn’t be further imposed on it.

According to a recent order posted on the NAA’s official website, Nestlé India has been accused of making unjust profits on chocolate products, instant noodles and pasta, wafer chocolates, instant coffee products, curry paste, among others, sold under the brand names Nescafe, Maggi and Kitkat.

The NAA order came after a probe which was conducted by the Directorate General of Anti-Profiteering between November 15, 2017 and June 30, 2018, after GST rate cuts were announced on several items on November 15, 2017 and January 2018.

The NAA order also stated that Nestlé India didn’t adhere to the government’s directive of pasting an additional sticker mentioned the new maximum retail price besides the old maximum retail price (MRP) of products whose price reduced after GST’s implementation, and later.

Since MRPs weren’t reduced and affixed on stock-keeping units by the company, there’s no likelihood of products being sold to consumers at reduced prices after GST rate cuts, the NAA order stated.

However, Nestlé India stated that the “benefits largely have been passed on by way of reduction of Maximum Retail Price or by way of weight increase in terms of grams. “Further, on stock-keeping units where it was not practicable to pass on the benefits, say for example Nescafé single-serve packs for Rs 2 or Maggi Noodles Rs 5 packs, the benefit has been passed on other pack sizes within the same product category,” the company stated.

The NAA also called Nestlé India’s attempt to pass on the benefits of rate reduction to customers as “arbitrary, inequitable and illegal”, and non-acceptable. The company had informed the NAA that since it couldn’t pass the benefit of GST rate cuts on Rs 5 packs of Maggi noodles and pasta, it passed on more benefit to consumers on packs of Rs 12 by reducing its price to Rs 11.

However, Nestlé India has already deposited Rs 16.58 crore with the Consumer Welfare Fund under the Department of Consumer Affairs and will now have to pay the remaining Rs 73.14 crore with interest.

The company stated that it has passed on the benefit of GST rate cut to consumers and will consider appropriate actions after studying the NAA order.

“In the absence of specific rules or regulations on profiteering, for rate changes effective November 15, 2017, and January 25, 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,” according to a Nestlé India statement.

“With this as the underlying spirit, Nestlé India approached NAA, to clarify on the methodology to be followed and in turn explained our methodology,” as per the company statement.