India alleges P&G kept more than $35 million in tax benefits: source

April 24, 2019

NEW DELHI (Reuters) – Indian tax authorities have alleged U.S. consumer goods maker Procter & Gamble did not pass on more than $35 million in tax benefits which were meant to have gone to its customers, a senior government official told Reuters on Wednesday.

Separately, the authorities are also investigating South Korea’s Samsung Electronics, the official added.

India’s National Anti-Profiteering Authority, a quasi-judicial body set up following the rollout of the Goods and Services Tax in 2017, found P&G had not reduced its prices on many products after a cut in tax rates on those items, said the official, who spoke on condition of anonymity.

P&G told Reuters it denied the allegation.

“We have passed the net benefit and communicated the same via advertising in mass media. As a responsible corporate, P&G has always been committed to passing the net benefit of GST rate reduction to the consumers,” it said in a statement.

Samsung said it had acted in accordance with the rules.

“Samsung reduced its sales price according to GST (Goods and Services Tax) reduction with effect from January 1, 2019. We are cooperating with DGAP (Directorate General of Anti Profiteering) on this matter,” the company said in a statement.

Under Indian law, companies had to pass on the benefits to customers after the government reduced the tax rate to 18 percent from 28 percent, and to 5 percent from 12 percent on many consumer durables and FMCGs (fast-moving consumer goods).

“P&G has been issued a notice to submit its reply on April 29 and explain why action should not be taken against it,” the official, with direct knowledge of the inquiry, told Reuters.

The authority will pass a final order in the next three months, the official added.

After an initial investigation, companies are given an opportunity to defend themselves before the authority passes a final order, which can be challenged in India’s higher courts.

($1 = 69.9510 Indian rupees)

(Reporting by Manoj Kumar in NEW DELHI, Sankalp Phartiyal in MUMBAI and Nivedita Bhattacharjee in BENGALURU; Editing by Alexander Smith)

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