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Johnson & Johnson fine: NAA's anti-profiteering rules are clear, says Deloitt India

Updated : December 26, 2019 03:40 PM IST

The goods and services tax (GST) profiteering watchdog the National Anti-Profiteering Authority (NAA) has imposed a fine on Johnson and Johnson. In the past too, many fast moving consumer goods (FMCG) companies have seen similar sort of penalties. MS Mani, partner-GST, Deloitte India discussed the matter in an interview with CNBC-TV18.

“Section 171 is the root cause for this investigation has been in the GST law since GST was introduced in July 2017. That is one section that has not been amended and broadly and in very simple terms the section says that if there is a reduction in the GST rates on any products, that needs to be passed on to the consumers.

"An element of concern is the time limit by which it is passed on because in FMCG typically, if the rate goes down today, you cannot pass it on to the consumer from tomorrow because there is a very long supply chain to retailers, distributors etc that could be an issue. I don’t think there is any reason for anyone to feel that the rules are not clear or there is some bit of lack of clarity, it is very clear that the rate reductions needs to be passed on to the consumers, there is no ambiguity as far as that is concerned,” he said.

He added: “I believe we are over and done with the rate reductions approximately six months back. After that we have not seen too many rate reduction and based on the collections that we are seeing now, whether there is a lot of stress on that, I doubt whether we will see too much of rate reduction.”

“What is not acceptable is that there is a price reduction on certain SKUs [stock keeping units] or on certain products made by manufacturers on the ground that it cannot be passed on in respect of other SKUs and other products. The decision that you referred to at the beginning of the conversation, there is an observation made by the NAA that the consumer for each product is different and therefore the consumers of each product needs to benefit in the proportion of the reduction. So lowering it on one product and not lowering it on another product is not something which the law contemplates.

“If the manufacturer is able to demonstrate that it is during that period during which they had a difficulty in passing on and it was passed on subsequently, possibly the NAA will take a very different view on that.”
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