Not Lovin’ It: Modi Govt Corners McDonald’s, Other Firms Over GST

Notice issued to McDonald’s, Lifestyle & dealerships of HUL & Honda for not passing on benefits of GST to customers

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Not Lovin’ It: Modi Govt Corners McDonald’s, Other Firms Over GST

A latte, a foundation cream, a body lotion and a car: consumers are angry that prices of these items have not come down after tax rates were lowered. That’s landed companies, including the operator of McDonald’s outlets, in the crosshairs of India's new anti-profiteering law.

The government issued notices to burger chain’s franchisee Hardcastle Restaurants Pvt Ltd, retailer Lifestyle India Pvt Ltd and a Honda car dealer, among others, for not passing on the Goods and Services Tax benefits to consumers, according to information on Director General of Safeguards’ website. The complaints were referred by the standing committee on anti-profiteering for a detailed probe.

The investigating agency asked the companies to disclose:

  • Profit and loss statements for the year ended March.
  • GST returns for July to December.
  • Input tax credit register
  • Price list before rates on more than 200 items were reduced from 15 November.

The new nationwide tax regime has an anti-profiteering clause that allows consumers to complain against companies not passing on the benefits of reduced rates or input tax credit.

169 such complaints of companies not passing on benefits of reduced GST rates to customers were received against suppliers of goods or services till 26 December
Shiv Pratap Shukla, Minister of State, Finance

Hardcastle Restaurants

The fast food chain has come under the scanner for allegedly not passing on benefits of reduced GST rates to customers.
The fast food chain has come under the scanner for allegedly not passing on benefits of reduced GST rates to customers.
(Photo: Reuters)

Two people complained against Hardcastle Restaurants Private Limited, which runs McDonald’s outlets in south and west India, for not reducing the price of ‘McCafe Regular Latte’. That’s after the GST Council cut tax on restaurants to 5 percent from 18 percent.

Along with copies of the documents sought, the company has to reply to DG Safeguards by 12 January if it admits to not passing the GST rate reduction or benefit of input credit to consumers. The company also has to find the quantum of benefit not passed on to customers.

Hardcastle Restaurants, in an emailed response to BloombergQuint, said it hasn’t received any such communication.

As a law-abiding corporate citizen, we are compliant with all applicable laws, and will respond to any such query as and when it is received by us.

Lifestyle International

A consumer complaint against the operator of apparel and lifestyle stores for not fully passing on the benefit of tax reduction on ‘Maybelline FIT Me Foundation’ even after GST was lowered to 18 percent from 28 percent. DG Safeguards initiated a probe against the retail chain.

The company has been asked to respond by 12 January if it admits to profiteering, and by calculating the benefit not passed on to customers.

The benefit of reduction in GST rates has been passed on to the customers wherever applicable, the company told BloombergQuint in an emailed statement.

Lifestyle International is providing the details that have been called for by the authorities and are extending full co-operation in the matter.

Sharma Trading Company

DG Safeguards issued a notice to a Jaipur dealer of consumer goods maker Hindustan Unilever Limited on 29 December for not passing the GST rate cut on Vaseline VTM lotion. The tax rate was reduced to 18 percent from 28 percent effective 15 November.

HUL is committed to ensuring that the benefits because of reduction in GST rates are passed on to the end consumers. We have communicated to the trader to pass on the benefits.
Hindustan Unilever Limited statement to BloombergQuint

Most of the products in the form of lower prices or increased grammage have already started landing in the market, HUL said adding that the company has been communicating the changes widely through advertisements.

Pyramid Infratech Private Limited

Thirty six homebuyers have accused the company of not passing on the benefit of input tax credit. Customers have to pay 12 percent GST on an under-construction home, while developers get input tax credit for it. The company had to respond by 1 January on whether it didn’t pass on the benefit to homebuyers.

Honda Dealer

A dealer of Honda Cars India – Vrandavaneshwaree Automotive Limited – was also served a notice by the DG Safeguards on a complaint that the firm didn’t appropriately reduce the cost of a car after the GST was implemented. The complaint said pre-GST levies like excise, central sales tax and VAT were not cut before imposing the new nationwide tax.

Emails sent to Sharma Trading Company, Pyramid Infratech, and Vrandavaneshwaree Automotive remained unanswered.

(This article was originally published on BloombergQuint and has been republished here with permission.)

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