2019 (6) TMI 715 - NAPA - GST

Tax Rate Increase Post-GST: No Benefit Passed to Consumers

Shri Navneet Gupta, Director General of Anti-Profiteering, Central Board of Indirect Taxes & Customs, Versus M/s. Bharti Telemedia Pvt. Ltd., Airtel

The case involved determining whether there was a reduction in the tax rate on DTH services post-GST implementation and if any benefit of the reduction ... Profiteering - DTH services - it was alleged that benefit of the reduction in the rate of tax was not passed on to the consumers by the DTH operators when the GST was introduced - contravention of the provisions of Section 171 of CGST Act, 2017 - HELD THAT:- The Applicant was not a subscriber of the Respondent and he had filed the present complaint on the basis of the plan chosen by another subscriber, Sh. Vijender Kumar. The details of the plan given by the above applicant also do not match with the plan adopted by him as he had not subscribed to the ‘Value Prime’ plan but had subscribed to a different plan called ‘My Plan’ and these above mentioned two plans had different values and features and they could not be compared. Therefore, the allegations made by the Applicant No. 1 has not been established - It is further found from the record that the Entertainment Tax was neither allowed as ITC in pre GST era nor has been allowed in the GST era, and that the cost of the entertainment tax was borne by the Respondent himself as is clear from the invoices produced by him. Accordingly, there is no ground to believe the contention of the above Applicant as no benefit of ITC has accrued to the Respondent which was required to be passed on. It is evident that there is no evidence to prove that the Respondent had charged more price in the GST era and not passed on the benefit of tax reduction, as the tax rate had increased from 15% to 18%. Further, the above Applicant had also not availed the opportunities of hearings to establish his case. Therefore, the Authority is of the view that the DGAP has rightly submitted that the allegation of profiteering is not established in the present case. Due to non-availability of cogent and reliable evidence, the provisions of Section 171 of the CGST Act, 2017 are not attracted and hence there is no merit in the application filed by the above Applicant. Appeal dismissed as not maintainable. Issues Involved:1. Whether there was a reduction in the rate of tax on the product in question after the implementation of GST w.e.f. 01.07.2017Rs.2. Whether any benefit of reduction in the rate of tax was to be passed onRs.Issue-wise Detailed Analysis:I. Reduction in the Rate of Tax Post-GST Implementation:The Applicant No. 1 alleged that the tax incidence on DTH services decreased from a combination of Entertainment Tax (10-25%) and Service Tax (15%) to a single GST rate of 18%. The DGAP's investigation revealed that the complaint lacked specific evidence and was too general, directed against the entire DTH industry without naming specific suppliers. The DGAP requested the Standing Committee to reconsider its decision due to the absence of documentary evidence. Despite this, the Standing Committee insisted on the investigation, citing the printed price as sufficient evidence for sectors where goods are sold on printed prices.Upon further investigation, the DGAP noted that the effective rate of tax increased from 15% Service Tax to 18% GST. The Respondent provided invoices showing that only Service Tax was charged pre-GST, and no Entertainment Tax was levied on the end-users. The DGAP concluded that there was no reduction in the rate of tax; instead, there was an increase from 15% to 18%. Therefore, the allegation that the reduction in the rate of tax did not result in a commensurate reduction in the price of DTH packages was found to be incorrect.II. Passing on the Benefit of Reduction in the Rate of Tax:The DGAP and the Authority examined whether the Respondent had passed on any benefits of tax reduction to the recipients. The Respondent argued that the complaint was not supported by evidence and contested the initiation of the investigation. The Respondent provided numerous documents, including ST-3 returns, financial statements, and sample invoices, to substantiate that there was no profiteering.The Respondent also argued that the Entertainment Tax was neither allowed as input tax credit in the pre-GST regime nor in the GST regime. The cost of Entertainment Tax was absorbed by the Respondent and not passed on to consumers. The DGAP confirmed that the Respondent had borne the Entertainment Tax cost, as evidenced by the invoices.Additionally, the Respondent demonstrated that post-GST, they had added value to their packages without extra charges and provided higher discounts on annual packs, among other benefits. The DGAP found that the packages and their contents had changed post-GST, making it impossible to compare pre-GST and post-GST prices directly.The Authority noted that the Applicant was not a subscriber of the Respondent and had based the complaint on another subscriber's plan details, which did not match the Respondent's records. The Applicant failed to provide pre-GST invoices or any evidence to substantiate the claim of profiteering.Conclusion:The Authority concluded that there was no reduction in the rate of tax post-GST implementation; instead, there was an increase from 15% to 18%. The Respondent had not violated Section 171 of the CGST Act, 2017, as there was no benefit of tax reduction to pass on. The complaint lacked evidence, and the Applicant did not utilize the opportunities for hearings to establish the case. Therefore, the allegation of profiteering was not established, and the application was dismissed as not maintainable.Order:The application was dismissed, and a copy of the order was sent to both Applicants and the Respondent. The case file was consigned after completion.