The company was found guilty for not passing the benefits of about Rs186.3 crore, in June. This came after the GST Council reduced rates in 2017 on certain products including shampoo and hair colour
French cosmetics firm LÓreal directed by Delhi High Court to pay a penalty for not passing on the benefit of reduced goods and service tax rates on their products to consumers.
LÓreal India had filed a petition against a tax demand. It was raised by the National Anti-Profiteering Authority (NAA) for allegedly not passing on the commensurate benefits to the end consumer by the company.
The company was found guilty for not passing the benefits of about Rs186.3 crore, in June. This came after the GST Council reduced rates in 2017 on certain products including shampoo and hair colour.
“This court directs the petitioner to deposit the principal profiteered amount after deducting the GST imposed on the net profiteered amount in six equated instalments commencing 10th October, 2022,” said the order copy.
The division bench of Justice Manmohan and Justice Dinesh Kumar Sharma in the 6 October order said, “Prima facie, Court noted that under Section 171 any benefit of reduction in rate of taxes or benefit of input tax credit on any supply of goods or services can only be by way of commensurate reduction in priced.”
Senior Advocate Mukul Rohatagi, appeared for the cosmetic major argued before the court’s order, despite of some products not been able to grant commensurate price reduction, still managed to pass on the benefit by increasing the grammage of the product. Also he contended about company of giving a post-sale discount of around Rs 73.59 crore. Hence, this amount must not be included in the total profiteered sum.
Ever since GST was rolled out, most of the companies, such as Hindustan Unilever, Procter and Gamble and LÓreal maintained to pass on the benefit of lower taxes largely by increasing the weight of items. Popular price tags like Rs10, Rs20 was never in their bucket like others and therefore instead they added more grammage to existing products by keeping the price intact at the same time. LÓreal India yielded a net profit of Rs 418 crore. Its total revenues recorded were Rs 3,739 crore during the year ending March 2022.