GST rate reduction must be passed on through lower MRPs and consumer prices; inadequate inquiry led to remand.

A reduction in GST rate was required to be passed on by commensurate reduction in the prices and MRPs of the affected SKUs, because the goods were sold as pre-packaged commodities with declared MRPs and the inquiry could not be confined to base prices charged to distributors. The DGAP report was found inadequate for not properly examining whether MRPs were refixed or reduced from the effective date, whether revised stickers or declarations were made on existing stock, whether the reduced GST rate was actually charged, and whether the benefit reached the ultimate consumer. The report was rejected and the matter was remanded for fresh factual verification.

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Issues: (i) Whether, on the facts examined, the benefit of reduction in GST rate had to be passed on by commensurate reduction in the prices and MRPs of the impacted SKUs; (ii) Whether the DGAP report concluding no contravention of the anti-profiteering provision could be accepted without a proper inquiry into refixation and disclosure of MRPs, charge of reduced GST, and passing on of benefit to the ultimate consumer.

Issue (i): Whether, on the facts examined, the benefit of reduction in GST rate had to be passed on by commensurate reduction in the prices and MRPs of the impacted SKUs.

Analysis: The relevant anti-profiteering provision requires that any reduction in tax rate be passed on by commensurate reduction in prices. On the record, the impacted products were sold as pre-packaged commodities with declared MRPs, and the pricing issue could not be confined only to the base price charged to distributors. The inquiry had to examine whether the MRPs of the affected SKUs were reduced, refixed, declared, and implemented from the effective date of rate reduction so that the benefit reached the consumer.

Conclusion: The benefit of tax reduction was required to be passed on through commensurate reduction in the prices and MRPs of the impacted SKUs.

Issue (ii): Whether the DGAP report concluding no contravention of the anti-profiteering provision could be accepted without a proper inquiry into refixation and disclosure of MRPs, charge of reduced GST, and passing on of benefit to the ultimate consumer.

Analysis: The report was found inadequate because it focused mainly on base prices and did not properly examine whether the MRPs were reduced from 15-11-2017, whether revised stickers or declarations were made on existing stock, whether the reduced GST rate was actually charged, and whether the benefit reached the end consumer. The finding that no violation was established was therefore not substantiated on the material then available. The matter required fresh factual verification on the specific issues flagged in the order.

Conclusion: The DGAP report was rejected and the matter was remanded for reinvestigation on the identified issues.

Final Conclusion: The proceedings did not culminate in a final profiteering determination on merits, and the case was sent back for a fresh investigation on the manner in which the tax reduction benefit was implemented.

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