InvestorQ : Why has the government slapped a huge penalty on Proctor and Gamble?
diksha shah made post

Why has the government slapped a huge penalty on Proctor and Gamble?

ishika Banerjee answered.
2 years ago

Let me clarify that the penalty was not imposed by the government on P&G but by the National Anti-profiteering Authority or NAA. This body was set up under the GST Act to penalize any company that does not pass on reduced GST to the end consumer.

On Thursday, the NAA slapped Rs.241 crore fines on 3 of the subsidiaries of the P&G Group for activities that were seen as profiteering in nature and went against the interests of consumers as laid out in the GST Act.

This exorbitant or super normal profit earned by P&G was on account of profiteering by not passing on the benefits of reduction in GST rates by the government of India to end consumers. It is mandatory under the GST Act, which had apparently not been done by P&G.

In the present situation, the NAA has not insisted on penalty but wants P&G to deposit the profiteered amount of Rs.241 crore with the interest applicable, if any. The company, meanwhile, is exploring legal options and has denied any profiteering by them.

It must be kept in mind that other FMCG companies also had this problem with the NAA. It has been a fairly contentious area since the net commensurate benefit as defined under the GST Act is open to very wide interpretation and that is the crux of the problem.

The NAA has alleged that the P&G subsidiaries hiked prices on the intervening night when rate reduction was notified and therefore it went against the grain of GST. However, accounting for past discounts and price reductions has been a grey area.