Hindustan Unilever Ltd (HUL), a prominent FMCG company in India, has been served with Goods and Services Tax (GST) demands and penalties totaling Rs 447.5 crore by authorities from five states. This significant financial demand includes issues such as the disallowance of GST credit and taxes on salaries, including allowances paid to expatriates.
The major components of the demand include a tax on expatriate salaries and allowances amounting to Rs 372.82 crore, with an additional penalty of Rs 39.90 crore. This was issued by the Joint Commissioner, CGST and Central Excise, Mumbai East. Additionally, the Deputy Commissioner of Commercial Tax Officer, Bangalore, issued a demand for tax based on the grounds of excess GST credit availed, amounting to Rs 8.90 crore, and a penalty of Rs 89.08 lakh. The Excise and Taxation Officer, Sonipat, Rohtak, Haryana, also issued a demand wherein GST credit of Rs 12.94 crore has been disallowed, accompanied by a penalty of Rs 1.29 crore. Furthermore, the Additional Commissioner, Central Tax and Central Excise, Kochi Commissionerate, has disallowed GST credit and turnover adjustment totaling Rs 8.65 crore and imposed a penalty of Rs 87.50 lakh.
HUL has noted that these orders are currently appealable and that the company will assess them. Despite the substantial nature of these demands, HUL has stated that there will be “no material impact on financial, no impact on operation” or other activities of the company due to the intimation of tax payable. The company plans to exercise its right to appeal.
This development has had a negative impact on HUL’s stock, which declined 1.59% to end at Rs 2,613.50 on the Bombay Stock Exchange (BSE). For the financial year that ended on 31 March 2023, HUL reported revenue of Rs 59,144 crore.
These developments are significant for Hindustan Unilever, as they represent a substantial financial challenge that the company must navigate, while also reflecting the broader complexities and challenges faced by large corporations in complying with tax regulations in multiple jurisdictions.