Johnson & Johnson distributor found guilty of GST rate cut profiteering

By

Isabelle Crossley

Published
Dec 10, 2018

The National Anti Profiteering Authority (NAA) found a Johnson & Johnson distributor guilty of not passing on Goods and Services Tax (GST) rate cuts to the consumer, setting a precedent for future cases.

The NAA ruled that a Johnson & Johnson distributor failed to pass on GST rate cuts worth Rs 5 lakh ($7,014) to the consumer for two products: a Johnson & Johnson Baby Shampoo 100 ml and a Johnson & Johnson Baby Powder 200g. The GST Council has reduced rates that applied to the two products to 18 percent from 28 percent on November 15, 2017.

The Directorate General of Anti Profiteering (DGAP) investigated the complaint as is procedure. It found that the distributor not only failed to lower prices after the tax cut but actually raised them from Rs 57.24 to Rs 62.10 for the Baby Shampoo and from Rs 80.82 to Rs 87.67 for the Baby Powder.

"The respondent [distributor] is directed to deposit the profiteered amount of Rs 501,646 along with the interest to be calculated at the rate of 18 per cent from the date when the above amount was collected by him from his customers," said the NAA to the Press Trust of India. The money will be deposited into the consumer welfare fund and the distributor must lower prices correctly henceforth.

The case is important because the NAA ruled that it was the distributor’s responsibility to account for GST rate reductions and not the business that manufactures the products’ responsibility, in this case Johnson & Johnson.