The anti-profit authority is examining whether companies pocketed profits after the government slashed GST rates on washing machines, TVs and other electronic products.
MUMBAI: After imposing fines on restaurants, fast moving consumer goods (FMCG) and pharma companies for not passing the benefits of lower goods and services tax (GST) to consumers, the authorities have turned their attention to makers of home appliances or white goods.
The anti-profit authority is examining whether companies pocketed profits after the government slashed GST rates on washing machines, TVs and other electronic products. While most large consumer durable companies are under the lens, Kolkata based IFB Appliances, which manufactures high-end washing machines and a handful of other products, is the first company that has received notices, said two people with direct knowledge of the matter.
IFB, a BSE-listed company, was asked to furnish details of cost and selling prices on its washing machines a few months ago. “The company did not respond to the first letter and so a second letter was written by NAA (National Anti-profiteering Authority). The company was asked to provide data around cost and selling prices of products before and after GST,” said a person close to the development.
An email sent to IFB on Saturday did not elicit any response. The person added that IFB could face a fine in the coming weeks. Other companies, too, are under scrutiny and the first set of letters is either issued or will be issued in the coming weeks. Industry trackers say that NAA’s focus seems to be on goods that could stoke inflation. One of the impacts of implementing GST globally is that it leads to higher inflation.
“The anti-profiteering authority is scrutinising every sector that directly impacts inflation and so white goods companies are currently under the lens. However, the question remains that in the absence of any prescribed methodology, it becomes really difficult for a company to compute the quantum of profiteering and pass on the GST rate cut benefits,” said Abhishek A Rastogi, partner at Khaitan & Co.
Insiders point out that for most consumer durables companies, it is extremely tough to even calculate precise price cuts before and after GST implementation. This is mainly because most companies have separate contracts with different retail outlets.
Source- Economic Times.