Nestle examining show-cause notice on GST benefits

By: |
December 18, 2019 7:26 PM

On December 12, the NAA imposed a penalty of Rs 90 crore on Nestle India for not passing on the benefit on rate reduction to consumers.

Nestle, FMCG firm, Nestle India, NAA, GST benefits, Maximum Retail Price, Maggi, NAAThe authority held that Nestles methodology of passing reduction in the tax was ‘illogical, arbitrary, and illegal, which has resulted in unfairness and inequality while passing on the benefit of tax reduction’.

Leading FMCG firm Nestle India on Wednesday said it is examining the show-cause notice slapped by the National Anti-profiteering Authority (NAA) for not passing on GST benefits to customers and take the next course of action in due course. On December 12, the NAA imposed a penalty of Rs 90 crore on Nestle India for not passing on the benefit on rate reduction to consumers.

“I respect the authority for the order they have passed. However, it is very unfortunate that despite all the evidence that we had provided them in terms of changes in grammage, changes in prices that we had effected we received this order,” company’s Chairman and Managing Director Suresh Narayanan told PTI on the sidelines of the CII FMCG summit. He further said that the company is examining the order and will take the next possible action in due course. The authority held that Nestles methodology of passing reduction in the tax was ‘illogical, arbitrary, and illegal, which has resulted in unfairness and inequality while passing on the benefit of tax reduction’.

“As a company we were transparent. We went to the authority actually voluntarily suo-moto, as we have some part of GST money collected, which we were not able to pass on asking where it could deposit this money. We had also given them the methodology as there is no existing one. We told pragmatically what we can be done in terms of price and grammage change. Yet, they have issued this notice,” Narayanan added.

He noted that if the products are for Rs 2 and Rs 5 and if the company had to pass benefits of 0.45 paise or 0.55 paise, there is no coinage to pass the benefit.  “We dont have 0.45 paise and 0.55 paise coins. So, how will I be able to pass on these benefits even if I want to. In smaller packs, it is difficult to give the benefit because there is no coinage,” he said, adding that the company has passed on the benefit on Maximum Retail Price (MRP) or by way of increase in grammage. Narayanan also said that the company plans to be plastic neutral at least in its Maggi brand this year.

“By plastic neutral, we mean that we will not add extra plastic into the system but re-use the recycled plastic. We are starting with Maggi. We have already set up garbage collection, segregation and disposal plants in Mussoorie and Dharmashala and we are working with the local authorities there,” he said. He further said that the company has set a target to use a 100 per cent recyclable plastic by 2025.

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