2020 (2) TMI 667 - NAPA - GST

Authority finds no CGST violation in profiteering allegation over Power Bank GST rate reduction.

Shri Rahul Sharma on behalf of M/s Local Circles India Pvt Ltd., Director General of Anti-Profiteering, Indirect Taxes & Customs, Versus M/s. Xiaomi Technology India Pvt. Ltd.,

The Authority determined that there was no violation of Section 171 of the CGST Act, 2017 in the case involving an allegation of profiteering by the ... Profiteering - supply of Xiaomi-Ml Power Bank 2i Red (10000 mAh) - allegation that Respondent had not passed on the benefit of this reduction in the GST rate to his recipients by way of commensurate reduction in the price - contravention of Section 171 of the CGST Act 2017 - penalty - HELD THAT:- The allegation of the Applicant No. 1 is that the Respondent had maintained the same selling price in respect of supplies of the said Power Bank before and after coming into force of Notification No. 24/2018-Central Tax (Rate) dated 31.12.2018 and he had not passed on the benefit of reduction in the GST rate to the Applicant No. 1 and other recipients. In this context, we have perused the screenshots of price of the product on the official web portal of the Respondent as on 19.12.2018 and 03.01.2019 and we observe that the said Power Bank was being classified under the HSN 8507 60 00 and supplies of the said Power Bank, described as “Lithium-ion Batteries”, were being effected in line with entry at S. No. 376AA, of Notification No. 18/2018-Central Tax Rate dated 26.07.2018, whereby the GST being levied @ 18% w.e.f. 26.07.2018. The entry after coming into force of Notification No. 24/2018-Central Tax (Rate) had no effect on the tax rate leviable on the said Power Bank, HSN 8507 60 00, being supplied by the Respondent. Hence, the present case is not a case of profiteering as had been alleged by the Applicant No. 1. The scope of this investigation/proceedings is limited to the issue of profiteering only and not to the issue of classification. The allegation of the Applicant No. 1 is not tenable and therefore the application alleging violation of provisions of Section 171 of the CGST Act, 2017 is hereby dismissed. Issues involved:1. Allegation of profiteering by the Respondent in relation to the supply of a specific product following a reduction in GST rate.2. Determination of whether the Respondent passed on the benefit of the tax rate reduction to the recipients in compliance with Section 171 of the CGST Act, 2017.Detailed Analysis:Issue 1: Allegation of ProfiteeringThe case involved an allegation by Applicant No. 1 that the Respondent engaged in profiteering by maintaining the selling price of a specific Power Bank despite a reduction in the GST rate from 28% to 18%. The Standing Committee on Anti-Profiteering forwarded the application to the Director General of Anti-Profiteering (DGAP) for detailed investigation under Rule 129 (6) of the CGST Rules, 2017.Issue 2: Compliance with Section 171 of the CGST Act, 2017The DGAP's report focused on determining whether the Respondent benefited from the tax rate reduction and if this benefit was passed on to the recipients as required by Section 171 of the CGST Act, 2017. The Respondent argued that there was no reduction in the tax rate for the Power Bank in question and provided detailed submissions to support his stance.Analysis of DGAP's FindingsThe DGAP's investigation revealed that the price of the Power Bank remained unchanged before and after the tax rate reduction. The Respondent classified the product under a specific HSN code, which did not see a change in the tax rate following the notification. The DGAP concluded that Section 171 of the CGST Act, 2017, which mandates passing on tax benefits to recipients, was not applicable in this case.Judgment and ConclusionUpon reviewing the DGAP's report and Applicant No. 1's submissions, the Authority determined that there was no violation of Section 171 of the CGST Act, 2017. The Authority dismissed the application alleging profiteering, stating that the Respondent had not breached the provisions of the Act. The scope of the investigation was limited to the issue of profiteering, not product classification.Final Decision and CommunicationThe Authority's decision to dismiss the application was communicated to both the Applicants and the Respondent. The case file was to be closed upon completion of the proceedings, and a copy of the order was to be provided to the concerned parties at no cost.