The National Anti-Profiteering Authority’s (NAA) move to slap a penalty of Rs 380 crore on Hindustan Unilever Ltd (HUL) for alleged failure to pass on to consumers the lower incidence of GST on its products is irrational. It takes away from India’s claim to be working to improve ease of doing business. NAA’s arbitrariness makes a case for its abolition.
The GST Council had recommended rate reductions — from 28% to 18% and 18% to 12% — on a variety of goods on November 10, 2017. And industry was mandated to lower rates from the midnight of November 14, 2017, in four days’ time. This is not logistically feasible for products already out in the market: no one can recall millions of units of shampoo, toothpaste, soap, etc, to reprint packaging to reflect new tax rates and prices. During the time it took to print fresh packaging material with revised prices, HUL took the decision to raise the selling price to the distributor and offer the government the excess so recovered, instead of lowering the price charged to the distributor and creating the possibility of retail networks profiteering from a lower bulk price while the printed MRP reflected the unrevised, higher tax rate. The company has now been penalised for enriching the exchequer, instead of letting traders profiteer.
NAA has faulted HUL for not effecting uniform price cuts on stock-keeping units (SKUs) — jargon for the pack sizes — without looking at the net effect of the pricing changes. Profiteering would mean making extra money, not varying the SKU size for pricing convenience. On what basis has the NAA determined that price changes on some SKUs alone are valid? Such arbitrariness strengthens the case for abolishing the NAA, and leaving things to the Competition Commission of India to handle any unfair trade practice.