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India alleges big multinationals did not pass on tax benefits: source

The logo for Procter & Gamble Co. is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 27, 2018. REUTERS/Brendan McDermid

By Manoj Kumar

NEW DELHI (Reuters) - Indian tax authorities have alleged that a number of big multinational companies have not passed on benefits from a tax cut to customers, a senior government official told Reuters.

The official said, for example, that the tax authorities have alleged that 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.

Separately, the authorities are also investigating South Korea's Samsung Electronics and U.S. drug maker Johnson & Johnson among others, the senior government official, speaking on condition of anonymity, said.

P&G, Samsung and J&J all deny any wrongdoing.

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 prices on many products after a tax cut on those items, the official said.

In a statement, P&G said: "As a responsible corporate, P&G has always been committed to passing the net benefit of GST rate reduction to the consumers." P&G said it had passed on the rollbacks and communicated this via advertising in mass media.

Samsung also 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.

A J&J spokeswoman said via email that the company had passed on all benefits to customers, after the government exempted sanitary napkins from the goods and services tax.

"The matter is currently under adjudication and we continue to work closely with the authorities to address any queries that they may have on the subject," the spokeswoman said.

Under Indian law, companies had to pass on the benefits to customers after the government reduced GST to 18 percent from 28 percent, and to 5 percent from 12 percent on many products.

The government also exempted some goods that had earlier been taxed.

"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, said. The official said the authority would pass a final order in the next three months.

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 = 70.1275 Indian rupees)


(Additional reporting by Zeba Siddiqui in NEW DELHI, Sankalp Phartiyal in MUMBAI and Nivedita Bhattacharjee in BENGALURU; Editing by Euan Rocha/Alexander Smith/Jane Merriman)