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of <h1>Cosmetic cream manufacturer violated Section 171 CGST Act by not passing tax reduction benefits to consumers</h1> <h3>Shri R.K. Gupta, Director General of Anti-Profiteering, Indirect Taxes & Customs Versus M/s. Abbott Healthcare Pvt. Ltd., M/s. Sami Labs Ltd. M/s. Viswas Medico,</h3> Shri R.K. Gupta, Director General of Anti-Profiteering, Indirect Taxes & Customs Versus M/s. Abbott Healthcare Pvt. Ltd., M/s. Sami Labs Ltd. M/s. Viswas ... Issues Involved:1. Allegation of profiteering by not passing on the benefit of tax rate reduction.2. Examination of the tax rate structure before and after GST implementation.3. Determination of the quantum of profiteering.4. Compliance with Section 171 of the CGST Act, 2017.5. Issuance of incorrect invoices and imposition of penalty.Detailed Analysis:1. Allegation of Profiteering:The core issue revolves around the allegation that the Respondent No. 1 increased the MRP of 'Melaglow Rich (Niacinamide) Depigmentation & Glow Restoration Cream' from Rs. 365 to Rs. 415 per unit post-GST implementation, despite a reduction in the tax rate. The applicant claimed that this was a contravention of Section 171 of the CGST Act, 2017, which mandates passing on the benefit of tax rate reductions to consumers.2. Examination of Tax Rate Structure:The Director General of Anti-Profiteering (DGAP) investigated the tax rate structure and MRP of the product across different periods:- Pre-GST: Central Excise Duty (CED) exemption until 06.05.2016, followed by an effective CED rate of 8.13% of MRP.- Post-GST (01.07.2017 to 14.11.2017): GST at 28%.- Post-GST (15.11.2017 onwards): GST reduced to 18%.The DGAP found that the base price of the product increased from Rs. 202.06 (pre-GST) to Rs. 230.90 (post-GST), indicating that the benefit of tax reduction was not passed on to consumers.3. Determination of Quantum of Profiteering:The DGAP calculated the amount of profiteering by comparing the base prices and tax rates before and after GST implementation. The investigation concluded that the Respondent No. 1 profiteered an amount of Rs. 96,59,716.26 by increasing the base price of the product and not passing on the benefit of reduced GST rates to consumers.4. Compliance with Section 171 of the CGST Act, 2017:The Respondent No. 1 argued that Section 171 was not applicable as it only referred to reductions in GST rates, not pre-GST tax rates. However, the Authority clarified that the intention of Section 171 was to ensure that any reduction in tax rates (including those resulting from the transition to GST) should lead to a commensurate reduction in prices. The Authority rejected the Respondent's interpretation, stating that the term 'rate of tax' in Section 171 has a broader scope and includes comparisons between pre-GST and post-GST rates.5. Issuance of Incorrect Invoices and Imposition of Penalty:The Authority noted that the Respondent No. 1 issued incorrect invoices by not reflecting the correct base price and charging additional GST on the inflated price. This was deemed a deliberate contravention of the CGST Act, 2017, making the Respondent liable for penalties under Section 122(1)(i) and Rule 133(3)(d) of the CGST Rules, 2017. The Respondent was given an opportunity to explain why a penalty should not be imposed.Conclusion:The Authority directed the Respondent No. 1 to reduce the price of the product as per Rule 133(3)(a) of the CGST Rules, 2017, and deposit the profiteered amount of Rs. 96,59,716.26 along with 18% interest in the Consumer Welfare Fund of the Central and State Governments. The DGAP was also instructed to further investigate the quantum of profiteering on all products supplied by the Respondent No. 1.
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