Benefit of the rate reduction was not passed on to the customers
Applicable on product Applicable on product “Matchless Plus TTWG Grinder” Benefit of the rate reduction was not passed on to the customers
BEFORE THE NATIONAL ANTI PROFITEERING UNDER THE CENTRAL GOODS AND SERVICE TAX ACT 2017
|Date of Institution||24.12.2018|
|Date of Order||22.03.2019|
In the matter of
1. Kerela State screening committee on anti Profiteering
2. Director General of Anti Profiteering central Board of Indirect Tax & Customs 2nd floor Bhai Vir Singh Sahitya Sadan Bhai Vir Singh Marg gole Marcket new Delhi 110001
M/S Win Win Appliance T.C 28/106 KRA 28 kaithamkuku Trivendrum Kerala 69502
1.Sh. B.N Sharma Chairman
2.Sh. J.C Chauhan Technical Member
3.M/s Bhagyadevi Technical Member
4.Sh. Amand Shah Technical Member
1.None for the Applicant No. 1
2.Sh Akasht Aggrawal Assistant commissioner for the Applicant No. 2
3.Sh G. Jayaprakash advocate for the respondent
1. The brief facts of the present case are that the rate of tax on Grinder was reduced from 28% to 12% w.e.f. 15.11.2017, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017. The Applicant No. 1, after verification that the benefit of the rate reduction was not passed on to the customers had referred the matter to the Standing Committee on Anti-profiteering, alleging profiteering by the Respondent on the supply of “Matchless Plus TTWG Grinder” (here-in referred to as the product), vide the minutes of its meeting held on 08.05.2018. The Applicant No. 1 had relied on two invoices issued by the Respondent, Invoice No. 627 dated 28.09.2017 (Pre-rate revision) and the other Invoice No. 943 dated 27.12.2017 (Post-rate revision), as per the details furnished in the Table-A given below. The Applicant No. 1 had also claimed that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the Central Goods & Services Tax (CGST) Act, 2017 and hence appropriate action should be taken against him.
|Name of the Product
||Pre GST rate revision on 15.11.2017||Post GST rate revision on 15.11.2017
|Invoice No. & Date
||Discounted Base Price (in Rs.)
||Invoice No. & Date
||Discounted Base Price (in Rs.)
|Matchless Plus TTWG Grinder (HSN Code 85094010)||
2. The Standing Committee vide the minutes of its meeting dated 02.07.2018, after prima facie satisfying itself that there was profiteering had forwarded the complaint to the Director General of Anti-Profiteering (DGAP) to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 and to determine whether the benefit of reduction in the rate of tax on the above product had been passed on by the Respondent to his recipients or not?
3. The DGAP after concluding his investigation has submitted his Report on 13.11.2018, under Rule 129 (6) of the CGST Rules, 2017. It is revealed from the Report that the DGAP had issued notice dated 05.09.2018 under Rule 129 of the CGST Rules, 2017, calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in the rate of tax had not been passed on to the recipients by way of commensurate reduction in price. The Respondent was also asked to suo-moto determine the quantum of benefit not passed on, if any, and indicate the same in his reply. The period of investigation covered by the DGAP under this Report is from 15.11.2017 to 31.07.2018 and all the supplies of the product in question were made in the State of Kerala only.
4. The Report states that the Respondent had submitted his replies to the DGAP vide his letters dated 25.09.2018 and 03.10.2018 in which it was stated that he was a distributor of the product which was being sold under the brand name Butterfly, and was manufactured by his supplier viz. Mis Butterfly, Gandhimathi Appliances Limited, 32/1487 Cl, Kochappilly Road, Bye-Pass Junction, Palarivattom, Kerala- 682025. It is also stated that the manufacturer was revising his price list every quarter and the product was being sold by the Respondent to the retailers at the price fixed by the manufacturer. The Respondent has also stated that his selling price for the product was Rs. 60531- when the GST rate was 28% and the base price of the product (without GST) was Rs. 4728.90, while his purchase price for the product was Rs. 4291.06. After the GST rate reduction, his selling price of the product was reduced to Rs. 5629- from Rs. 6053/-, though the base price was increased to Rs. 4774.59 but his purchase price with discount of Rs, 229.07, was Rs. 4352.50. The Respondent has further stated that he had sold the above goods based on the purchase price charged by the manufacturer and increase in the base price had occurred due to increase in the purchase price of the product after revision of the price by the manufacturer, effective from November, 2017. The Respondent has further claimed that he has not indulged in profiteering by retaining the benefit of the reduced rate of tax and he had passed on the benefit of reduced tax rate to the recipients by commensurate reduction in the price. The Respondent has also submitted the GSTR-1 and GSTR-3B returns for the period July, 2017 to July, 2018, price lists of product pre & post 15.11.2017 along with the copy of the invoices of the product for the period 01.07.2017 to 31.07.2018.
5. The DGAP has further stated that the issues for determination were whether the rate of tax applicable to the product was reduced w.e.f. 15.11.2017 and if so, whether the benefit of such reduction in the rate of tax was passed on by the Respondent to his recipients in terms of Section 171 of the CGST Act, 2017. The DGAP has further informed that the Central Government on the recommendations of the GST Council had reduced the GST rate on the above product from 28% to 12% w.e.f. 15.11.2017 vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, in consequence of which the Respondent was required to sell the above goods on the base price which was being charged by him before 15.11.2017 and levy GST @12% so that the benefit of reduction in the rate of tax could be passed on to the customers. The DGAP has further informed that Section 171(1) of the CGST Act, 2017, stated that “Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.” Thus, the legal requirement was abundantly clear that in the event of benefit of input tax credit or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services and such reduction could only be in absolute terms such that the final price payable by a consumer must get reduced commensurate with the reduction in the GST tax rate.
6. The DGAP has further informed that during the investigation, it had been observed that the issue related to passing on the benefit of reduction in the rate of GST to the recipients of goods has been examined after arriving at the base price of the product, pre 15.11.2017 and post 15.11.2017. It is further submitted that the sale invoices during the period w.e.f. 01.07.2017 to 31.07.2018 clearly showed that the Respondent had increased the base price of the product from Rs. 4728.90 to Rs. 4774.59 when the rate of tax was reduced from 28% to 12%. Thus, by increasing the base price of the product, the Respondent did not pass on the benefit of the reduction in the GST rate to his customers, instead profiteered from such reduction. The DGAP has also submitted that the base price of the product was increased after 15.11.2017 and by increasing the base price of the product consequent to the reduction in GST rate, the commensurate benefit of reduction in the GST rate from 28% to 12% was not passed on to the recipients and hence, the provisions of Section 171 of the CGST Act, 2017, were attracted and accordingly the amount of profiteering during the period 15.11.2017 to 31.07.2018, was arrived at as Rs. 1,20,194/-.
7. The above Report received on 14.11.2018 was considered by the Authority in its sitting held on 15.11.2018 and it was decided to hear the Applicants and the Respondent on 28.11.2018. On the date of hearing no one appeared for the Applicant No. 1, Applicant No. 2 was represented by Sh. Akshat Aggarwal, Deputy Commissioner and the Respondent was represented by Sh. G. Jayaprakash, Advocate. Though several opportunities for hearing were also granted to the manufacturer Mis Butterfly but none appeared on his behalf.
Sd.-(B.N. Sharma )Chairman
Sd.- (J.C. Chauhan ) Technical Member
Sd.-( R. Bhagyadevi ) Technical Member
Sd-(Amand Shah ) Technical Member