Maggi dealer holding back GST cut

NEW DELHI: A Maggi Noodles dealer has come under watch for not passing on the benefits of a cut in goods and services tax (GST) to consumers as required. The National Anti-Profiteering Authority upheld a complaint in this regard, saying the dealer didn’t have the liberty to arbitrarily decide which product should get the tax cut benefit.

The authority said the benefit of tax reduction had to be passed on for every unit – the dealer could not selectively lower price of one pack size to cover other pack sizes. A 35-gm pack of Maggi Noodles is distinct from a 70-gm pack; both may be bought by different customers and hence, the benefit accruing to one customer cannot be given to another, it observed.

The authority ordered the dealer to deposit undue gains of Rs 90,778, along with interest at the rate of 18%, in the Consumer Welfare Fund after refunding the profiteered amount of Rs 2,253 (along with interest) to the applicant. The complainant, a retailer of Maggi Noodles, had alleged that after the GST rate was reduced to 12% from 18% on November 15, 2017, base price of the product was increased to bring it on a par with the price before the change.

The dealer contended that the benefit in respect of a Rs 5 pack had been passed on by reducing the price of a Rs 12 pack by Rs 1, which was more than the total benefit of 92 paise on both pack sizes. The dealer also said such a reduction was made in light of legal tender issues due to fractional pricing.

Although the retailer subsequently sought to withdraw the complaint, it was rejected because the investigation had already been undertaken.

“This is another ruling which mandates that benefit arising as a result of reduction in GST rate has to be passed on at each stock keeping unit (SKU) level and cannot be passed on at a product or entity level,” said Pratik Jain, national indirect taxes leader at PwC.

Jain said the authority rejected the plea of fractional pricing, saying it is for the customer to furnish the required legal tender and a supplier cannot resort to profiteering on this account. However, he acknowledged that the ruling on pricing for each SKU could lead to issues for certain industry segments, specifically FMCG.

“From a commercial standpoint, reducing the price of each SKU, particularly with smaller MRP (Rs 5 or below), is often a challenge due to various reasons including availability of legal tender below Rs 1,” Jain added.

The development was reported by

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