Respondent cleared of CGST Act violation due to unchanged tax rate on shirts. Kerala CST Act deduction denied.

The National Anti-Profiteering Authority found that the respondent did not contravene Section 171 of the CGST Act, 2017 as there was no reduction in the tax rate on shirts pre and post-GST implementation. The Kerala State Screening Committee's argument for a deduction under the Kerala CST Act, 2017 was dismissed due to lack of legal basis and the increase in the IGST rate. The application was therefore rejected, and the case was closed.

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Issues: Allegation of profiteering by respondent on supply of shirts; Examination of pre-GST and post-GST invoices; Application of Section 171 of CGST Act, 2017.

In a case where the Kerala State Screening Committee alleged profiteering by a respondent on the supply of shirts, the Directorate General of Anti-Profiteering (DGAP) conducted a detailed investigation under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The case revolved around the respondent's failure to pass on the benefit of a tax rate reduction at the implementation of the CST w.e.f. 01.07.2017. The DGAP's report highlighted that the tax rate on the product remained the same in both the pre-GST and post-GST era, and the base prices also remained unchanged. Consequently, the provisions of Section 171 of the CGST Act, 2017 were deemed to not have been contravened, and the allegation of profiteering was not substantiated.

Upon consideration of the DGAP's report and relevant documents, the National Anti-Profiteering Authority deliberated on whether there was indeed a reduction in the tax rate and if Section 171 of the CGST Act, 2017 applied to the case. It was established that the product had been exempted from Central Excise Duty and only attracted VAT at 5%, which remained consistent post-GST implementation. As there was no reduction in the tax rate, the provisions of Section 171 were deemed inapplicable.

The Kerala State Screening Committee, as the Applicant No. I, contended that an amount of CST should have been deducted from the pre-GST price, resulting in an increase in the post-CST sale. However, this argument was refuted as the Committee failed to provide a legal basis for the deduction under the Kerala CST Act, 2017. Additionally, the increase in the inter-state tax rate from 2% to 5% of IGST further invalidated the claim. Consequently, the application was dismissed as there was no reduction in the tax rate post-GST implementation, rendering Section 171 (1) of the CGST Act, 2017 inapplicable. The order was to be shared with all concerned parties, and the case file was to be closed upon completion.

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