NAA Rules That Johnson & Johnson Profiteered By Rs 230.4 Crore Due To Not Passing On GST Rate Cut To Its Consumers

The National Anti-profiteering Authority (NAA) has ruled that Johnson & Johnson (J&J) has profiteered by Rs 230.4 crore due to reduced goods and services tax (GST) rate, by failing to pass on the benefit of the reduced GST rate to its consumers.

According to an order passed on December 23, 2019, by NAA chairman B N Sharma, the company has been given three months to deposit the amount along with 18% interest with the National Consumer Welfare Fund and in similar funds set up at state levels.

If the company defaults on the payment, the money could be recovered by central and state GST officials, the order has stated. The NAA also stated that the company was “apparently liable" for penalty and has directed officials to issue a notice to the company on why penalty should not be imposed on it.

Earlier, the Director General of Anti-Profiteering (DGAP), which is the investigation arm of the NAA had filed an application against J&J in the matter and the resulting probe had run from November 15, 2017 to December 2018.

According to the DGAP report, J&J had raised the base price of certain products when the GST rate was cut. “The DGAP concluded that the amount of net higher sales realization due to increase in the base prices of the impacted products despite the reduction of GST rate from 28% to 18% or in other words, the profiteered amount, came to Rs 230.4 crore,” the NAA order said.

By raising the base price of products, the benefit of the GST rate cut was not passed on to consumers, the DGAP stated.

Incidentally, the anti-profiteering provision in the CGST Act states that benefits of tax rate cuts or tax rebates should be passed on to consumers by way of commensurate reduction in prices.

In November 2017, the GST Council had announced one of its biggest rounds of tax rate cuts after it moved 178 items from the 28% slab to the 18% slab.

It was after that development that the DGAP looked into several complaints of profiteering by consumer goods manufacturers and their dealers.