Goods and Services Tax

INSTANT NOODLES: INSTANT PROFITS

Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 5-11-2018 – If noodles can be cooked and consumed instantly, why not profit on sale of noodles! In yet another case where anti-profiteering charges have been established, the National Anti-profiteering Authority (NAA) has confirmed that sale of Maggie Noodle pack (Noodles) at same price even after rate of GST on it was reduced from 18% to 12% w.e.f. 15 November, 2017 was a case of anti-profiteering u/s 171 of the CGST Act 2017 read with Rule 128 CGST Rules, 2017 and that the dealer ought to be booked and penalized for indulging in such anti-profiteering act. In a recent order dated 8th October, 2018, the NAA has in the matter of Ankur Jain and DGAP, CBIC, New Delhi v. Kunj Lub Marketing Pvt. Ltd., Hardoi (UP) (2018) 10 TMI 510; confirmed the allegation of anti-profiteering and penalized the dealer. The complainant (retailer) lodged an e-mail complaint stating that he had purchased Maggie Noodle pack of 35 gms having max

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e to the retailer and around 25 paise to the ultimate consumer which would have been inconvenient to both the retailer and the consumer. However, on Maggi Noodles pack of 70 gms. bearing MRP of ₹ 12/- per pack, the benefit on account of GST rate reduction for the retailer would have been approximately 56 paise against which the distributor had reduced the price by 92 paise with reduced MRP of ₹ 11/- and thus, the benefit in respect of ₹ 5/- MRP pack had been passed on by reducing the price of other packs of Maggi Noodles by more than what was required. It claimed that the benefit of GST rate reduction had been passed on in respect of Maggie Noodles as a whole. The dealer has contended that it had passed on the benefit of GST rate reduction in respect of 70 gm. pack of Maggi Noodles bearing MRP of ₹ 12/- by reducing the price for the complainant and the ultimate consumer by 92 paise and Re. 1/- respectively, which was much more than the required reduction of appr

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3.96 18% 12468 4.67 4.17 12% 382048 4.43 0.24 90,778/- Total Profiteering on sale of the Product 90,778/- The NAA considered the report of DGAP and carved out the following issues to be decided by the Authority: Whether the benefit accrued due to reduction in the rate of tax of one product can be passed on via another product or not? Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 in this case? If yes then what was the quantum of profiteering? It noted that there is no doubt that the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in the price charged by the dealer which amounts to violation of the provisions of Section 171 of the Act. Further, the distributor had no legal sanction to increase the base price of the product on his own and what was required of him was that he should have only reduced the MRP of the product by taking in to account the effect of the reduction in the rate of tax

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h benefit. As per the provisions of Section 171 of the Act the benefit has to be passed on to each recipient and the same can not be selectively granted or denied. It is also clear that the Maggi Noodle pack of 35 Gms. is distinct from a 70 Gms. pack and both the packs may be bought by the different recipients/customers and hence the benefit accruing to one customer can not be given or denied to another nor can the benefit given to one set of customers arbitrarily enhanced and set off against the another. No such adjustments are permissible under the law. The NAA held that the distributor had denied benefit of the reduction in GST rate to the consumers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and had thus realized more price from them than he was entitled to collect and had also compelled them to pay more GST than that they were required to pay by issuing incorrect tax invoices and hence he has committed offence under section 122 (1) (i) of the CGST A

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