The GST body is looking into Godrej's Rs 2,825 crore purchase of Raymond's consumer products company

30 Oct 2023 , 01:11 PM

News reports stated that the Directorate General of GST Intelligence (DGGI) is looking into a recent transaction in which Raymond sold its consumer products division to a Godrej division. The cited reports stated that Raymond Consumer Care Ltd. (RCCL) has been contacted by the GST authorities to provide an explanation for why transaction amount GST should not be applied. 

Through a slump sale in April 2023, GCPL purchased the FMCG company as well as the Park Avenue, KS, KamaSutra, and Premium trademarks. The acquirer, Godrej Consumer Products Ltd., reported paying Rs 2,825 crore in a filing with the markets.

It is also believed that the DGGI asked GCPL for an explanation on the subject. The reports further stated that as part of its inquiry, the Mumbai division of DGGI also inspected locations connected to Raymond. An official may carry out an inspection under Section 67 of the CGST if he has cause to suspect that an individual has concealed information in order to avoid paying taxes.

‘Please note that it was an inspection by DGGI in respect of the specified transaction and not a search,’ a Raymond spokeswoman wrote in an email response to an ET inquiry. Additionally, we have offered sufficient justification and supporting documentation demonstrating that the going concern sale of the business to GCPL does not attract GST.

The aforementioned transaction does not incur any GST because it was a slump sale of the business on a continuing concern basis, given the terms of the agreement and the foundation of the independent tax expert opinion requested by both parties. A person with knowledge of the ongoing investigation stated, ‘The department is of the opinion that the deal attracts GST payable at 18%. Certain documents have been handed over by the company and the explanation is being studied.’

The multinational conglomerate stated on Thursday that it had reached an agreement earlier this year to buy Raymond’s Consumer Care business, which includes deodorant KS Spark, men’s grooming brand Park Avenue, and sexual health brand Kamasutra.

Through its affiliated business Raymond Consumer Care Limited (RCCL), which combined home care, sexual wellness, and personal care in FY19–20, the Raymond Group engages in the FMCG sector. Strong channel distribution, operational efficiency, and business synergies with premium brands like Park Avenue, KamaSutra, KS, and Premium were all brought about by the combination.

In the fiscal year 2022, Raymond’s Consumer Care division recorded sales of Rs 522 crore. Raymond is a small player in the mainstream soap and shampoo industry, but it is among the top five in the men’s deodorant category and the third largest in the branded condom area, with sales of Rs 522 crore in FY 21–22.

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