GST profiteering: Rs 230-crore penalty on Johnson & Johnson

New Delhi: The National Anti-Profiteering Authority has slapped a Rs 230 crore penalty against baby products maker Johnson& Johnson for profiteering from cut in goods and services tax (GST) rates.

“The methodology adopted by the respondent ( J& J) while computing the benefit of tax reduction was illogical, unreasonable, arbitrary, and incorrect, and hence cannot be accepted,” the authority said in a order on Tuesday.

The authority said it found it ‘surprising’ that the FMCG major had not added the tax cost and losses to prices of products between July 1 and November 14, 2017, but had chosen to do so from November 15, when it was supposed to have reduced prices due to the rate reduction to 18% from 28%.

“It is absolutely clear that the respondent has not commensurately reduced prices but has infact increased them by adding tax costs and losses from November 15, 2017 on the base prices that he was already charging,” the authority said.

“It is absolutely clear that the respondent had no intention of passing on the benefit of tax reduction to consumers,” the NAA said, adding that the company arbitrarily computed the pre rate reduction base prices on the basis of its high selling prices, instead of an average selling price.

The authority added that the company, which sells its products through general trade, institutional trade, modern trade and exports, was responsible for fixing the prices of its products as a manufacturer, and cannot therefore shift responsibility on retailers who continued to sell the products at pre rate-reduction prices.

Johnson& Johnson has been given three months to comply, and has been directed to reduce its prices commensurately.