Goods and Services Tax

Non-reduction of MRP invokes Anti-profiteering law

Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 12-1-2019 – The National Anti-profiteering Authority (NAA) has held that non-reduction of prices (MRP) after GST rate reduction amounts to indulgence in profiteering so as to invoke section 171 of the CGST Act, 2017 on anti-profiteering measures. In the matter of DGAP, CBIC, New Delhi v. JP & Sons, Delhi (2018) 12 TMI 472 (NAA), the NAA vide its Order dated 06.12.2018 has directed the business entity to reduce the prices of products by making commensurate reduction in prices vis-à-vis reduction in tax rates and pass on the benefit to buyers, besides depositing the amount so profiteered alongwith interest @ 18 percent to the Government exchequer. It also found the business entity guilty of issuing wrong invoices by not showing the correct basic prices and held it liable for offence committed under section 122(l)(i) of the CGST Act, 2017 for which penalty was imposable after following the adjudication process.

= = = = = = = =

Plain text (Extract) only
For full text:-Visit the Source

= = = = = = = =

mp; Johnson Pvt. Ltd. (J & J) was supposed to sell the above goods on the base prices which were being charged by him before 15.11.2017 and levy GST so that the benefit of reduction in the rate of tax could be passed on to the customers. Submissions by Distributor On notice, it was contended by the business entity that : Billing software was being controlled by J & J and distributor could not do any changes / modification therein.. GST rate was reduced but it took few days to make changes in the billing software. Price charged was not more than the MRP mentioned on products. Invoices taken as evidence were generated prior to updation of software by J & J. It was bound to use the J & J software only and its ownership rights etc were with company only. Base prices could be changed by the company only and not by distributor. It was bound to charge the increased prices as per the terms of the agreement with J & J. It had deposited the due tax which it had charged from t

= = = = = = = =

Plain text (Extract) only
For full text:-Visit the Source

= = = = = = = =

17.11.17 Base Price 74.76 79.74 80.82 86.21 93.75 100.00 Tax 20.93 14.35 22.63 15.52 26.25 18.00 Invoice Price 95.69 94.09 103.45 101.72 120.00 118.00 JB Shampoo (TBP) 100 ml. (In Rs.) Particular J&J to Distributor Distributor to Retailer Retailer to Consumers Upto 14.11.17 W.e.f 17.11.17 Upto 14.11.17 W.e.f 17.11.17 Upto 14.11.17 W.e.f 17.11.17 Base Price 52.95 54.06 57.25 58.45 66.41 67.80 Tax 14.83 9.73 16.03 10.52 18.59 12.20 Invoice Price 67.78 63.79 73.28 68.97 85.00 80.00 DGAP Findings The DGAP investigation revealed that by increasing the base prices of these products and having maintained the pre-GST rate reduction MRPs, the benefit of GST rate reduction was not passed on to the customers by the business entity. From the price list, it was observed that it had raised the base prices of both the products during the period between 15.11.2017 to 18.11.2017. The base price of Baby Shampoo (100 ml). was increased from ₹ 57.24 to Rs. 62.10 and the same was increased in res

= = = = = = = =

Plain text (Extract) only
For full text:-Visit the Source

= = = = = = = =

was observed that the base prices of 121 products were increased after 15.11.2017 and in the case of 2 products, the base prices were reduced after 15.11.2017. Therefore, the DCAP concluded that in respect of the 130 products, supplied by the business entity during the period between 15.11.2017 to 31.03.2018, the amount of profiteering came to ₹ 5,01,646/- on account of increase in their base prices. NAA Findings & Conclusion The NAA observed that the Central Government vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017 had reduced the rate of GST from 28% to in respect of the subject two products with effect from 15.11.2017, the benefit of which was required to be passed on to the recipients by the business entity as per the provisions of Section 171. Based on documentary evidences, it had no doubt that the business entity had increased the base prices of the above products w.e.f. 15.11.2017 by the amount as shown in table, whereas it was required not to inc

= = = = = = = =

Plain text (Extract) only
For full text:-Visit the Source

= = = = = = = =

no control over billing. Moreover, it had also not produced any evidence to show that it had made any correspondence with J & J to inform that he was bound to reduce the prices due to reduction in the rate of tax and J & J should either not increase the base prices or compensate it for the benefit it was bound to pass on to his customers, therefore, it is quite apparent that he had deliberately charged the enhanced prices with an intention to pocket the amount which he was bound to pass on to the recipients. Further, mere charging of the tax @ 18% after 15.11.2017 cannot be construed to have resulted in passing on of the benefit when the base prices had been deliberately increased. It had increased the base prices illegally and also forced its customers to pay additional GST on the increased prices otherwise there would have been further reduction in the prices and hence it has acted in violation of the provisions of Section 171 of the CGST Act. It had issued incorrect invoices

= = = = = = = =

Plain text (Extract) only
For full text:-Visit the Source

= = = = = = = =

y making commensurate reduction in their prices keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. To deposit the profiteered amount of ₹ 5,01,646/- along with the interest to be calculated @ 18% from the date when the amount was collected from customers till the said amount is deposited. Since the buyers were not identifiable, directed the DGAP to get the amount of profiteering of ₹ 5,01,646/- along with interest deposited from the business entity in the Consumer Welfare Fund of the Central and the concerned State Governments as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. In case of non-deposition of this amount within 3 months, directed DGAP to initiate recovery as per the CGST Act. Since investigation in the instant case covered the period upto 31.03.2018 only, directed DGAP to further investigate the quantum of profiteering which the business entity has made thereafter and submit report. Based on prin

= = = = = = = =

Plain text (Extract) only
For full text:-Visit the Source

= = = = = = = =

Leave a Reply