Nestle’s chairman and managing director Suresh Narayanan said it is a challenge to pass on the benefits of good and services tax (GST) to consumers on smaller sized packs priced around ₹2 or ₹5 as there is no practical methodology for such price points.
On December 12, the Maggi instant noodle maker was fined ₹73.15 crore by the National Anti-Profiteering Authority (NAA) for failing to pass on the benefits of GST to consumers.
“There is no existing methodology and we told them (NAA) pragmatically what we can do in terms of price and grammage changes. But there are products which are priced at ₹2 and ₹5. For such products, the benefit is ₹25 paise or ₹50. We don’t have those different coins. How will I pass on these benefits even if I want. Therefore we gave (the benefits) at the overall product level because for the smaller packs, it is very difficult,” Narayanan said on the sidelines of the CII’s National FMCG Summit ‘Growth Wapsi: Revving Up FMCG Growth’.
However, he said that the company respects the order and would examine its next course of action. Last week, NAA, which deals with customer complaints regarding not receiving tax cut benefit, said Nestle’s methodology of passing reduction in the tax was arbitrary. It had rejected the company’s claims that it has passed on benefits of ₹192 crore by reducing maximum retail price.
“It is very unfortunate despite all the evidence provided to them (NAA) in terms of changes in grammage and prices, we have received this order. As a company we are very transparent, we went to the authority voluntarily saying that we have some part of the GST money that we are not able to pass on. So where should we deposit this money. That’s how the discussion started,” Narayanan said.
Narayan also said the company has seen a steady performance in the last one despite the slowdown in the consumption across the country particularly in the rural areas. “As far as we are concerned we are fairly stable. If some of measures that the government is contemplating leads to more money in the hands of the consumers, and hopefully it should lead to improvement. I hope this happens sooner than later,” he said.
While the company has not seen a major impact in its sales so far because of the rural slowdown, Narayan said it could get affected if market “goes more bad from here”.