2018 (12) TMI 1002 - NAPA - GST

Respondent Cleared of Profiteering Allegations Under CGST Act

The Authority found that the Respondent did not violate Section 171 of the CGST Act, 2017, as they had passed on the benefit of Input Tax Credit (ITC) to ... Passing on the benefit of input tax credit under Section 171(1) of the CGST Act, 2017 - commensurate reduction in prices - profiteering assessmentPassing on the benefit of input tax credit under Section 171(1) of the CGST Act, 2017 - commensurate reduction in prices - Whether the respondent contravened the obligation to pass on the benefit of input tax credit to the buyer by way of commensurate reduction in the price of the car. - HELD THAT: - The Authority accepted the DGAP's factual comparison of pre GST and post GST purchase and sale invoices and the calculation of dealer margins and discounts. The DGAP found the respondent's profit margin declined from Rs. 28,589 pre GST to Rs. 16,621 post GST; after accounting for trade discounts of Rs. 4,500 (pre GST) and Rs. 9,000 (post GST) the total post GST margin (Rs. 25,621) remained lower than the total pre GST margin (Rs. 33,089). The post GST purchase price was lower than the pre GST purchase price and the post GST sale price was lower than the pre GST sale price, while the base price charged in the post GST invoice was substantially less than in the pre GST invoice. The DGAP also recorded that the respondent became eligible to claim ITC on taxes (including excise, NCCD and cesses previously non creditable) in the post GST period and that overall ITC availability had increased. On these findings the Authority concluded that the benefit of increased ITC was reflected in reduced base price and overall sale price and that the allegation that the benefit of ITC was not passed on was not established. [Paras 13]No contravention of the obligation to pass on the benefit of input tax credit under Section 171(1) was found.Profiteering assessment - If there was a violation, what was the quantum of profiteering to be disgorged. - HELD THAT: - The Authority recorded the DGAP's conclusion that there was 'nil' profiteering after comparing pre and post GST landed prices, margins and discounts, and after noting increased entitlement to ITC in the post GST period. Because the DGAP's detailed factual and accounting analysis established that post GST margins and prices were lower than pre GST levels, the Authority found no amount of profiteering to be quantified or returned to the applicant. [Paras 13, 14]No profiteering was established and no quantum was required to be determined or disgorged.Final Conclusion: The application alleging contravention of Section 171(1) of the CGST Act, 2017 was dismissed as the Authority found that the benefit of input tax credit had been passed on and there was no profiteering. Issues Involved:1. Violation of Section 171 of the CGST Act, 2017.2. Quantum of profiteering, if any.Detailed Analysis:1. Violation of Section 171 of the CGST Act, 2017:The primary issue was whether the Respondent violated Section 171 of the CGST Act, 2017, which mandates that any reduction in the tax rate or benefit of Input Tax Credit (ITC) should be passed on to the recipient by way of commensurate reduction in prices. The Applicant alleged that despite purchasing a car post-GST implementation, the Respondent did not pass on the ITC benefit.The investigation revealed that the Respondent's profit margin decreased from Rs. 28,589 pre-GST to Rs. 16,621 post-GST, even after considering trade discounts. The DGAP's report showed that the post-GST purchase price was Rs. 6,906.05 less than the pre-GST purchase price, and the post-GST sale price was Rs. 15,683.50 less than the pre-GST sale price. The base price charged in the post-GST era was Rs. 1,73,346 less than the pre-GST base price due to the availability of ITC on the entire GST paid at 45%, which was not available in the pre-GST era.The DGAP concluded that there was an increase in ITC available to the Respondent post-GST, and the base price charged from the Applicant was reduced accordingly, indicating that the benefit of ITC was passed on. Therefore, the allegation of not passing the ITC benefit was not substantiated.2. Quantum of Profiteering:Since the investigation established that there was no violation of Section 171, the issue of determining the quantum of profiteering became moot. The DGAP's report and the Authority's analysis confirmed that the Respondent had indeed passed on the benefit of ITC to the Applicant, resulting in a reduced base price post-GST.Conclusion:The Authority concluded that the provisions of Section 171 (1) of the CGST Act, 2017, were not contravened. The application alleging profiteering was dismissed as the Respondent had passed on the ITC benefit, resulting in a commensurate reduction in the car's price. The detailed examination of invoices and profit margins substantiated this conclusion, leading to the dismissal of the application.