HUL stock falls over 2% after GST authority holds firm guilty of not passing on rate cut benefits to consumers

The Hindustan Unilever (HUL) stock fell in early trade today after GST anti-profiteering authority found the FMCG firm guilty of not passing on rate cut benefits of Rs 383 crore to consumers. The stock fell up to 2.33% to 1742 level on the BSE. The large cap stock has been losing for the last four days and fallen 4.92% during the period.

The stock has gained 30.08% during the last one year and gained 28.16% since the beginning of this year.

The stock was trading near the 50 day moving average of 1757 level but below the 200 day moving average of 1678 level.

18 of 36 brokerages rate the stock "buy" or 'outperform', 14 "hold", three "underperform" and  one "sell", according to analysts' recommendations tracked by Reuters.

The complaint before the National Anti-Profiteering Authority (NAA) stated that although the Goods and Services Tax (GST) rate on a large number of products was cut from 28 per cent to 18 per cent, HUL had not reduced the maximum retail price (MRP) of its products.

The NAA while passing the order said that Rs 383.35 crore worth "benefit has been denied" by HUL to his customers.

As per GST rules, 50 per cent of the amount profiteered or Rs 191.68 crore is required to be deposited by the company in the central consumer welfare fund (CWF), while the balance amount is to be deposited in the CWF of concerned states where the company sold its products.

"Since the respondent (HUL) has already deposited an amount of Rs 160.23 crore in the Central CWF, he is hereby directed to deposit an amount of Rs 31.45 crore in the central CWF and the balance amount of Rs 191.68 crore in CWFs of the states," the NAA said.

The authority also directed HUL to reduce the prices of its products by way of commensurate reduction keeping in view the reduced rates of tax and the benefit of ITC.

The present investigation was conducted by the Directorate General of Anti-Profiteering between November 15, 2017, and February 28, 2018.

The NAA directed DGAP to conduct further investigation to ascertain whether the respondent has passed on the benefit of tax reductions in respect of all the products being sold by him and submit a report quantifying the amount of profiteering.

Meanwhile, the Sensex and Nifty opened lower today amid weak Asian markets unnerved by US political developments including a US federal government shutdown and President Donald Trump's hostile stance towards the Federal Reserve chairman.

While the Sensex fell 363 points to 35,106, Nifty was down 100 points to 10,562.

Edited by Aseem Thapliyal