Business
The two companies were allegedly found profiteering from GST rate cuts
Updated : Oct 24, 2018, 05:05 AM IST
After an anti-profiteering investigation, Fast Moving Consumer Goods (FMCG) majors Hindustan Unilever Ltd (HUL) and Nestle will be facing a tax evasion probe, government sources said.
"It has been seen that the two companies are charging different tax rates for the same product. For example, one product with the same Hormonised System of Nomenclature (HSN) code (used to classify products) should have one rate while the same has been taxed at two separate rates of 8% and 10%. Similarly, in some cases, the firms have claimed wrong Input Tax Credit (ITC) on basis of incorrect tax rates and taken the credit despite being ineligible," as per sources.
The 'tax evasion' came to light while the two were being investigated for profiteering.
The Directorate General of Anti-Profiteering (DGAP) found HUL and Nestle profiteering about Rs 500 crore and Rs 100 crore, respectively from Goods and Services Tax (GST) rate cuts announced by the government to give relief to consumers.
The companies have to submit all the details of their sales to the investigators.
The DGAP has referred the instances of tax evasion to the concerned tax authorities.
"The cases have been referred to the GST authority of the concerned jurisdiction depending upon where the supply offices are registered. They will examine and take further action after proper verfication," said a source, adding that the cases have been referred to over 30 offices of the GST authority in various states where the assessee is registered.
A large number of the products of HUL as well as Nestle are under scanner.
HUL is the biggest consumer goods brand which manufactures Lux soap, Lipton tea and Dove shampoo.
Nestle, another big brand in the FMCG segment, makes popular Maggi noodles, Nescafe coffee and Kit Kat chocolates.
Responding to a query by DNA Money, Nestle India spokesperson said, "Nestle India is a responsible, responsive and fully compliant corporate citizen. We operate with strict adherence to all applicable rules and regulations."
HUL said it had no comments to offer when contacted.
Meanwhile, the anti-profiteering watchdog National Anti-Profiteering Authority, (NAA) functioning under the finance ministry, may announce next week its decision in the profiteering case against HUL after the DG submitted the investigation report in the matter.
On the other hand, final order in the Nestle case may come after two and a half months. Earlier, the two companies have voluntarily deposited about Rs 175 crore to the government's Consumer Welfare Fund (CWF) for violating anti-profiteering norms.
What investigators allege