It’s now the turn of Patanjali Ayurveda to bear the punitive action by the National Anti-Profiteering Authority. Patanjali, founded by Baba Ramdev, has been found guilty of not passing on the price benefit to the consumers when there was a cut in the GST rates. The company has been asked to remit Rs 75.08 crore as the penalty and they will have to pay an additional 18% p.a. interest on this amount.
The case relates to the period 2017 when the GST Council reduced the GST on certain FMCG products from 28% to 18%. The understanding is that the government decides to reduce the rates of GST on products with the aim of benefitting the ultimate consumers of the products. Where it is found that the manufacturers of the products, instead of reducing the prices, increase the base price of the product thereby not passing on the benefits to the consumer. The item in question in the case of Patanjali is washing powder in 2kg pack.
The NAA either receives a complaint in these matters or takes suo motto action based on its own research on the pricing in the market. The company’s records are then examined to find out the exact quantity of the product sold at the higher prices and the computation of the amount payable as penalty for profiteering is done.
Patanjali Ayurveda has contested the NAA’s conclusion saying that it had failed to increase the prices before the GST rate reduction though the input costs had risen. Therefore, it increased the prices. This explanation was not acceptable to the NAA and the agency said not increasing the prices earlier was a mistake on Patanjali’s part and the consumer should not be penalized for it.
Besides Patanjali, other FMCG firms like HUL and Nestle have also had to face similar allegations and pay penalty.
As per the law created for this purpose, the penalties collected are for consumer welfare for which funds have been created in the states as well as at the centre.