The Directorate General of GST Intelligence (DGGI) is currently investigating a recent business deal involving Raymond and Godrej in India. This investigation centres around Godrej Consumer Products’ acquisition of Raymond Consumer Care Limited’s FMCG (Fast Moving Consumer Goods) business. This FMCG business is notable for its presence in the deodorants and sexual wellness product categories within India.
According to a report in The Economic Times, the GST authorities have raised concerns and requested that Raymond Consumer Care provide an explanation regarding whether GST (Goods and Services Tax) should be applicable to the transaction’s value. The acquisition by Godrej Consumer Products involved a substantial payment of Rs. 2,825 crore to Raymond and encompassed the acquisition of the FMCG business and its associated trademarks, including well-known brands like Park Avenue, KS, KamaSutra, and Premium. This acquisition was structured as a slump sale.
In response to this investigation, the DGGI conducted an inspection at premises associated with Raymond. It’s worth noting that the company clarified that this action was an inspection, not a search. A Raymond spokesperson emphasized that they have provided a comprehensive explanation, supported by relevant documents, to justify their assertion that the sale should be exempt from GST. They argued that, based on the specific terms and conditions of the deal, which were reviewed and supported by an independent tax expert consulted by both parties, GST should not be levied on the transaction.
Sudhir Sitapati, the Managing Director and CEO of Godrej Consumer Products Limited (GCPL), initially announced this acquisition in April. He explained that this strategic move complements their existing business portfolio and growth strategy. Specifically, it focuses on categories with significant growth potential, particularly in under-penetrated markets. Deodorants and sexual wellness products, where Raymond is a prominent player, are seen as offering substantial double-digit growth opportunities over several decades. This is attributed to India’s relatively low per capita consumption in these categories compared to similar emerging markets. Godrej Consumer Products aims to fully capitalize on this growth potential.
Atul Singh, the Group Vice Chairman of the Raymond Group, confirmed the divestment of their FMCG business, which includes iconic trademarks like Park Avenue and Kamasutra, to Godrej Consumer Products. He expressed pride in the development of strong homegrown brands that have become leaders in their respective categories. Additionally, he expressed confidence that Godrej Consumer Products is well-positioned to effectively drive the growth of these brands in the future.
In summary, the DGGI’s scrutiny of the business deal between Raymond and Godrej is primarily focused on whether GST should be applied to the transaction value. Raymond has provided detailed explanations and supporting documentation to argue for GST exemption based on the deal’s specific terms and conditions and the endorsement of an independent tax expert.
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