Baba Ramdev’s Patanjali Denying GST Benefits To Customers; Rs 75 Crore Penalty Imposed

The National Anti-Profiteering Authority (NAA) has fined Patanjali, founded by Baba Ramdev for not passing on the price benefit to the consumers when there was a cut in the GST rates.

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Patanjali Fined!

In 2017 the GST Council reduced the GST on certain Fast-moving consumer goods (FMCG) from 28% to 18%. The government decides to reduce the rates of GST on products with the aim of benefitting the ultimate consumers of the products. As the government placed this move into action, many manufacturers of the products, instead increased the base price of the product thereby not passing on the benefits to the consumer. The item that caused the penalty was Patanjali’s washing powder.

According to reports by NAA, Patanjali had increased the price of their 2kg pack washing powder after GST reduction. 

The company has to deposit the Rs 75.08 crore that it has profited as the penalty and an additional payment of 18% p.a. interest on this amount. 

Patanjali Ayurveda has challenged the NAA’s conclusion saying they bore the cost of rate increase when compared to the pre-GST regime and did not pass the cost of increased prices onto the consumers then. This explanation was not acceptable to the NAA that Patanjali took matters into their own hands and that this cannot be a reason for not giving GST reduction benefits to the consumers. NAA also said it was Patanjali’s mistake that they did not increase the prices earlier. 

NAA rejected another argument of Patanjali. Patanjali accused NAA of violating Article 19(1)(g).

Recently, other FMCG companies like HUL and Nestle were also asked to pay up as fine for profiteering.

How Does NAA Function?

The NAA either receives a complaint in these matters or takes its own action based on its own research on the pricing in the market.

The alleged company’s records are then examined to find out the exact quantity of the product sold at the higher prices. The computation of the amount payable as penalty for profiteering is then done.

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.