Patanjali charged with profiteering Rs 150 cr from GST cuts

Yoga guru Baba Ramdev-led Patanjali Ayurved has not passed on to its customers the benefits of tax rate cuts announced by the government during the last one year, an anti-profiteering probe has revealed.

Charged with profiteering to the tune of over Rs 150 crore, the company may soon have to cough up penalties as well as return the amount to consumers, sources said.

The investigation report of the Director General of Anti-Profiteering (DGAP) is likely to be submitted to the apex body National Anti-Profiteering Authority (NAA) this week for a hearing. NAA's final order is expected within three months, sources said.

"The company has been found to have profiteered from the tax rate cuts announced by the government for consumers on a wide range of products on November 15, followed by another round of tax cuts in January. The company instead of passing on the benefits of tax cuts to consumers kept the profits to itself. Nearly 100 products were under the scanner," sources said.

Haridwar-based swadeshi brand Patanjali is the country's third-biggest fast-moving consumer goods (FMCG) company in terms of market share after HUL and ITC. It sells from soaps, shampoos, toothpaste, hair oil to honey, ghee and atta, among other products.

While the other two big FMCG companies Hindustan Unilever Ltd (HUL) and Nestle, also charged with profiteering, have suo moto deposited Rs 175 crore with the government while accepting profiteering, Patanjali has not offered to do that.

In fact, in case of Patanjali, the anti-profiteering agency's investigation arm had to issue summons to the company's chief financial officer YD Arya to appear before it as the firm did not respond to the notices seeking information and documents needed for the probe.

Patanjali did not respond to the query sent by DNA Money.

The probe had started about six months ago after a consumer complained against the company to the national-level Standing Committee of the NAA. The committee referred the case to the DGAP for a detailed investigation.

Under the Goods and Services Tax (GST) regime, the businesses have the obligation to compute and pass on the GST benefit in prices of goods as well as services every time the government slashes the taxes on them.

According to rule 171 of the Central GST (CGST), 2017, any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit (ITC) shall be passed on to the recipient by way of commensurate reduction in prices.

The NAA will start hearing the case from next month, sources said. If it finds Patanjali guilty of profiteering, it can ask the company to reduce prices from retrospective effect, return the due amount to the customer, impose the penalty or in extreme cases may even cancel the firm's registration. In the event the customers cannot be identified, the NAA can also ask the erring company to deposit the amount to the Consumer Welfare Fund (CWF) of the government.

The NAA is the apex anti-profiteering body set up to protect consumer interest with DGAP as investigation arm and complaints mechanism via several state-level Screening Committees and a national Standing Committee.

Patanjali's turnover zoomed to more than Rs 10,500 crore while it reported a 54% jump in its net profit at Rs 1,194 crore during FY18. The firm hopes to double its revenue to about Rs 20,000 crore by the end of this year.

UNDER SCANNER

• The company may soon have to cough up penalties as well as return the amount to consumers, according to sources
   
• The investigation report of DGAP is likely to be submitted to the apex body NAA this week for a hearing. NAA’s final order is expected within three months