FMCG giant Hindustan Unilever Limited (HUL) has received a hefty blow from tax authorities across five states, facing a combined demand of ₹447.5 crore in Goods and Services Tax (GST) dues and penalties.
The late-night regulatory filing on January 1st raised concerns about the company’s compliance practices, particularly regarding expat salaries and GST credit claims.
HUL, known for household brands like Lux, Lifebuoy, and Surf Excel, received five separate orders from various GST zones last week, questioning its claims for GST credit and the taxability of employee salaries, including expat allowances.
While the company maintains these “orders are currently appealable,” the sheer size of the demand raises significant questions.
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The largest chunk, amounting to ₹372.82 crore in tax and ₹39.9 crore in penalty, originates from Mumbai East’s Joint Commissioner of CGST and Central Excise. The authorities have challenged HUL’s treatment of expat salaries and allowances as exempt from GST.
Similarly, Bengaluru’s Deputy Commissioner of Commercial Tax Officer has questioned excess GST credit claims of ₹8.90 crore, slapping an additional penalty of ₹89.08 lakh.
Other notable demands come from Sonipat (Haryana) – ₹12.94 crore credit disallowance and ₹1.29 crore penalty – and Kochi (Kerala) – ₹8.65 crore credit and turnover adjustment disallowance with a ₹87.50 lakh penalty.
Despite the significant sum involved, HUL asserts that these demands will have “no material impact on financial, no impact on operation” of the company.
However, the shadow of potential tax evasion and non-compliance hangs heavy. With a revenue of ₹59,144 crore for the previous year, HUL needs to address these concerns swiftly to maintain investor confidence.
Key Takeaways:
- HUL faces ₹447.5 crore in GST demands and penalties across five states.
- Issues focus on expat salary taxability and excess GST credit claims.
- Company claims no material impact, but concerns linger about compliance.
- HUL’s response and potential appeal process will be closely watched.
Additional Points for Consideration:
- The specific details of HUL’s expat salary structure and justification for GST exemption.
- The nature of the disputed GST credit claims and HUL’s defense strategy.
- The potential impact on HUL’s financial performance and brand image.
- Broader implications for similar cases involving multinational companies and GST compliance.
Conclusion:
The GST demand on HUL is a major development in India’s corporate landscape and raises concerns about potential tax irregularities at a prominent FMCG player.
The company’s response and the outcome of any appeals will be closely watched by investors, analysts, and tax authorities alike.
