HUL Faces Rs 962 Crore Tax Notice Over TDS Issue In Rs 3,045 Crore GSK Deal

Notably, this tax notice is directly related to Hindustan Unilever’s purchase of the Horlicks brand from GSK for the Indian market, a deal valued at Rs 3,045 crore

HUL completed its merger with GlaxoSmithKline Consumer Healthcare Limited (GSKCH) after receiving the required approvals in 2020

Source : HUL

Hindustan Unilever has received a tax demand notice amounting to Rs 962.75 crore from the Income Tax Department, said the FMCG company through an exchange filing on Monday. This tax demand includes an additional Rs 329.33 crore in interest.

The tax demand arises from issues related to the non-deduction of Tax Deducted at Source (TDS) concerning a significant financial transaction. Specifically, this transaction involved a remittance of Rs 3,045 crore made for the acquisition of intellectual property rights (IPR) associated with India Health Food Drink (HFD) from the GlaxoSmithKline (GSK) Group.

Notably, this tax notice is directly related to Hindustan Unilever’s purchase of the Horlicks brand from GSK for the Indian market, a deal valued at Rs 3,045 crore. Additionally, through this transaction, Hindustan Unilever also integrated other GSK brands into its portfolio, including Boost, Maltova, and Viva, further expanding its product range.

Despite the substantial tax demand, the company has stated that it does not anticipate any major financial impact at this time.

"The Company has strong case on merits on tax not withheld, basis available judicial precedents, which have held that the situs of an intangible asset is linked to the situs of the owner of the intangible asset and hence, income arising on sale of such intangible assets are not subject to tax in India," HUL said.

In response to the recent demand, the FMCG giant plans to challenge the order and take all necessary legal measures under the law. Additionally, HUL has stated that it holds an indemnification right, enabling it to recover the tax demand issued by the Income Tax Department from the relevant parties.

The company is expected to take further actions to assert this right.

HUL completed its merger with GlaxoSmithKline Consumer Healthcare Limited (GSKCH) after obtaining the required approvals in 2020.

For Q1 of FY25, the consumer goods leader reported a 3 per cent year-on-year (YoY) increase in net profit, reaching Rs 2,538 crore, slightly below the Street estimate of Rs 2,541 crore. HUL's revenue from operations for the reported quarter was Rs 15,166 crore, a 2 per cent increase YoY compared to Rs 14,931 crore in the June 2023 quarter.