2018 (12) TMI 1402 - NAPA - GST

Allegation of profiteering post-GST implementation dismissed by Authority

The case involved an allegation of profiteering by the Respondent on the supply of a particular mattress post-GST implementation. The Directorate General ... Reduction in rate of tax - benefit of input tax credit - pass on by way of commensurate reduction in prices - profiteering - Section 171 of the CGST Act, 2017Reduction in rate of tax - profiteering - Section 171 of the CGST Act, 2017 - No reduction in the rate of tax occurred on the product w.e.f. 01.07.2017 and therefore the provisions of Section 171 of the CGST Act, 2017 are not attracted. - HELD THAT: - The DGAP's investigation compared pre-GST tax incidence (CST 2% + Central Excise 12.5% = 14.5%) on the specified mattress with the post-GST rate of 28% and found an increase in the rate of tax. Section 171 requires that any reduction in the rate of tax or benefit of input tax credit be passed on to recipients by way of a commensurate reduction in prices. As there was no reduction in the rate of tax but rather an increase from 14.5% to 28% after implementation of GST w.e.f. 01.07.2017, the statutory requirement to pass on a benefit did not arise and the allegation of profiteering could not be sustained. [Paras 6, 8]Application dismissed; allegation of profiteering not established as Section 171 is not attracted.Final Conclusion: The Authority accepted the DGAP report that the tax rate on the product increased on implementation of GST w.e.f. 01.07.2017 and, since no reduction in tax or input tax benefit occurred, the complaint of profiteering under Section 171 of the CGST Act, 2017 is rejected and the application is dismissed. Issues: Allegation of profiteering by the Respondent on the supply of a specific mattress due to not passing on the benefit of tax reduction post-GST implementation.Analysis:1. The case involved an allegation of profiteering by the Respondent on the supply of a particular mattress due to not passing on the benefit of a tax rate reduction post-GST implementation. The Kerala State Screening Committee on Anti-Profiteering referred the case to the Standing Committee, which further directed the Directorate General of Anti-Profiteering (DGAP) for detailed investigation under Rule 129 (6) of the CGST Rules, 2017.2. The DGAP's report highlighted that the rate of tax on the product in question increased from 14.5% in the pre-GST era to 28% in the post-GST era. As there was no reduction in the tax rate post-GST implementation, the DGAP concluded that the provisions of Section 171 of the CGST Act, 2017 were not contravened, and the allegation of profiteering was not established.3. The Authority, after considering the report and hearing from the concerned parties, focused on the key issue of whether there was a reduction in the tax rate and if Section 171 of the CGST Act, 2017 was applicable. Section 171 mandates passing on any tax rate reduction benefits to consumers.4. The examination of the facts revealed that there was no reduction in the tax rate on the product post-GST implementation. The tax rate had actually increased from 14.5% to 28%. Therefore, the Authority dismissed the application, stating that the allegation of profiteering was not sustainable under Section 171 of the CGST Act, 2017.5. Ultimately, the Authority found no merit in the application and dismissed it. The order was to be sent to all concerned parties, and the case file was to be closed after completion.