FMCG Cos face consumer ire over GST cut benefits
NAA has received over 300 customer complaints in recent weeks about companies not passing on the full benefit of tax cuts to consumers
NEW DELHI: The National Antiprofiteering Authority (NAA), the body that is tasked with ensuring that businesses pass on benefits of tax cuts to consumers, is witnessing a surge in complaints relating to overcharging by consumer goods companies.
The watchdog has received more than 300 complaints from customers in recent weeks about firms not passing on to consumers the full benefit of tax cuts on hand washes, deodorants, scented oils and cosmetics, two people familiar with the development said.
The surge in complaints hints at the challenges faced by manufacturers in ensuring prices of every product in their portfolio are reduced in line with tax cuts and rebates on inputs.
The complaints received by the NAA as well as the statelevel screening panels of the authority cover a large number of consumer items including khadi products, baby wash, disinfectant gels and haircare products, one of the two people cited above said on condition of anonymity.
NAA is expected to come out with orders on many of them over the next three months, said the person.
The Directorate General of Anti-profiteering investigates complaints and the NAA adjudicates on cases. Once a probe is completed, the NAA has a maximum of three months to give its ruling. In many cases, the hearings are at an advanced stage, said the person.
The anti-profiteering watchdog was set up in November last year, nearly five months after goods and services tax (GST) was implemented on July 1. In recent months, NAA and the tax administration have stepped up efforts to ensure that customers get the benefit of tax cuts. NAA accepts customer complaints through its website and has a helpline.
Queries emailed to companies such as Himalaya Drug Co., Khadi Natural Healthcare, Johnson & Johnson Pvt. Ltd and L’Oréal India Pvt. Ltd and to an external spokesperson for online retailer Cloudtail India Pvt. Ltd remained unanswered at the time of publishing.
Experts said that unlike many other industries, the packaged consumer goods industry has a very long supply chain, starting with the manufacturer and covering distributors, wholesalers, super stockists and then retailers. This makes it virtually impossible for businesses to enforce a price change across the entire chain when a tax cut is announced on a given day, said MS Mani, partner, Deloitte India. “In the FMCG (fast-moving consumer goods) sector, any failure to pass on the benefit of tax cuts to consumer is not driven by an intention to evade taxes as these companies hold their reputation dear,” said Mani.
FMCG products of individual companies go to as many as 500,000 retail outlets.
The GST Council had made large-scale tax cuts in November last year on items like shampoo, cosmetics, hair oil and groceries from 28% to 18% and in July this year from 28% to 18% on refrigerators, washing machines, small televisions and vacuum cleaners. For the authorities, it is important to ensure that consumers experience a price reduction after GST roll-out.
THE SURGE HINTS AT CHALLENGES FACED BY FIRMS IN ENSURING PRICES OF PRODUCTS ARE REDUCED IN LINE WITH TAX CUTS