TaxTMI 
TaxTMI 
2020 (11) TMI 104
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....the base prices of the food items sold by him and applied 5% GST thereon, by either maintaining the pre-rate reduction selling prices or even increasing them in the post-rate reduction period and thus he had resorted to profiteering. In support of her allegation, the above Applicant had submitted copies of tax invoices dated 11.11.2017 and 15.11.2017 vide which she had purchased "Short Capuccino" from the Respondent. 2. The application was examined by the Standing Committee on Antiprofiteering in its meeting held on 02.07.2018 and as per the minutes of the meeting it was decided to refer the matter to the Director General of Anti-Profiteering (DGAP) to investigate and collect necessary evidence to determine whether the benefit of reduction in the rate of tax on the restaurant service had been passed on by the Respondent to his recipients as per the provisions of Rule 129 (1) of the above Rules. 3. The DGAP had sought extension to complete the investigation, which was extended upto 31.12.2018 by this Authority vide its orders dated 09.10.2018 and 15.11.2018 in terms of Rule 129 (6) of the CGST Rules, 2017. After completing the investigation the DGAP had submitted his Report un....
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....1% and which was more than the increase in the base prices. The Report had also mentioned that the Respondent had claimed that in the month of October 2017, he had completed 5 years and had opened his 100th store and to celebrate the occasion he had offered all short/tall size handcrafted beverages at Rs. 100 (inclusive of all taxes) and this offer was only for one day i.e. on 28.11.2017 and was valid at his all stores in India, except 6 office stores which did not operate on weekends. 7. The Report had further mentioned that the Respondent had claimed that total sales made by him on an all India basis on 28.11.2017 were 2.35 lakh drinks which was 7 times more than his usual sales and he had received an amount of Rs. 2.32 Crore, which was 2.3 times more than his usual sales on a Saturday. 8. The DGAP had also submitted that while determining the ITC as a percentage of the total taxable turnover of the Respondent, the ITC for the period from July, 2017 to 14th November, 2017, as furnished in the GSTR-3B Returns, had been adjusted by excluding the amount of ITC on inter-unit branch transfers (as per ITC Register) and while determining the net taxable turnover of the Respondent ....
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.... Rs. 170/- when the rate of GST was reduced from 18% to 5%. Based on the reduction in the rate of tax and after taking into account the impact of denial of ITC, the outward supplies (other than zero rated, nil rated and exempted supplies) during the period from 15.11.2017 to 30.06.2018, the DGAP had estimated the amount of net higher sale realization due to increase in the base prices of the products. The DGAP had stated that 571 products were sold during the period from 01.11.2017 to 14.11 9017 and after scrutiny of the outward supplies it was found that 51 more products were also sold by the Respondent. 10. The DGAP had calculated the profiteered amount as Rs. 4,51,29,600/- by comparing the average base prices of the 51 products sold during the period from 01.10.2017 to 31.10.2017 and 571 products sold during the period from 01.11.2017 to 14.11.2017, with the actual basic prices of the said products sold during the period from 15.11.2017 to 30.06.2018. This profiteered amount had been arrived at in respect of those supplies where the base prices, post 15.11.2017, were increased by more than 10.83% (impact of denial of input tax credit). 11. After perusal of DGAP's Report, t....
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....cular State. He had further claimed that if the correct sale values were considered, the ratio of ITC to sales for the period from 01.07.2017 to 14.11.2017, would be 11.79% as against 10.83% as estimated by the DGAP. 14. The Respondent had further submitted that the DGAP while computing the average base prices prior to 14.11.2017 had taken incorrect value of quantities. He had also claimed that the DGAP had reduced the value of credit notes issued during the period from 01.10.2017 to 31.10.2017 for 51 products and for the period from 01.11.2017 to 14.11.2017 in respect of 571 products but had failed to reduce the corresponding quantity relating to the credit notes which had resulted in net sales being divided by the incorrect value of quantity. In other words this had resulted in calculation of alleged profiteering on a product even when there was no profiteering by the Respondent. 15. The Respondent had also claimed that he had adopted a policy of increasing the prices twice in a financial year, the first increase was w.e.f. 18.04.2018 by 3.75% which was ignored by the DGAP while computing the average prices. The Respondent had further claimed that he was following a differe....
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....not justified because in October 2017, he had completed 5 years and opened his 100th store in India and on this occasion he had offered all short and tall sized beverages at uniform price of Rs. 100/- (inclusive of all taxes) in all stores operational on 28.10.2017. Hence, the sales made on 28.10.2017 should be considered as exceptional supplies and must be ignored for the purpose of computation of average price per product since these supplies could not be treated as an indicator of the sales trend. 18. The Respondent had further argued that while computing the alleged amount of profiteering, the DGAP had sought to compare the tax inclusive price of the product sold by the Respondent, however, the Respondent had deposited tax in the account of the Government. 19. The Respondent had also averred that if his above objections were to be considered by the DGAP, the alleged profiteered amount would be reduced from Rs. 4,5129,600/- to Rs. 1,34,86,898/-. He had further averred that the DGAP's approach to compare the average price with the actual price on a pan India basis was incorrect. If the DGAP had compared the average price for both the periods then the net profiteering would ....
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....les would be 10.83% or 11.79% (later revised by the DGAP) and therefore any price increase upto 11.79% was justifiable and did not amount to profiteering and since the average price increase made by him from 15.11.2017 was 9 to 10%, any question of profiteering was to be ruled out. 22. The Respondent had also claimed that Rule 126 of the CGST Rules, 2017 empowered this Authority to determine the methodology and procedure for computing the extent of profiteering. However, no precise computation methodology or principles had been formulated by this Authority. The anti-profiteering provisions enacted in Australia and Malaysia were supported by the detailed set of rules for determining the manner in which the 'unreasonably high profits' or 'price exploitation' would be computed. In light of the legislations enacted in other countries upon introduction of GST, it was essential for this Authority to expressly set out detailed regulations for providing the methodology for commuting the extent of profiteering. 23. He had further claimed that right to trade was a fundamental right guaranteed under Article 19 (1) (g) of the Constitution of India. Right to trade included the right to de....
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....stated that in line with his policy of taking two price increases in a financial year, he had increased the base prices of his products by 3.75% w.e.f. 18.04.2018 and therefore any subsequent price change should be ignored for computing the profiteered amount. He had also stated that the DGAP had not considered the exceptional sales made on 28.10.2017 and that in respect of the new stores / markets there could be no element of profiteering as these stores did not operate prior to 15.11.2017. He had further stated that the average price increase made by him from 15.11.2017 was 9-10%, which was less than the loss of ITC of 11.79% as calculated by the DGAP and therefore he had passed on more benefit than the loss of ITC to him. He had also tabulated the trend of price increases made by him since 2014-15 onwards as is given in the Table-5 below:- Table -5 Period Average percentage of price increase for food and beverages April-14 4.73% July-14 to December-14 3.90% April-15 6.54% October-15 4.67% April- 16 2.33% October-16 3.38% April-17 4.12% 27. The Respondent vide his submission dated 16.07.2019 had stated that the investigation p....
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....23 170539574 Net Outward Taxable Turnover for the period from 01.07.2017 to 14.11.2017 (F)=(D-E) 273776346 265879381 260298058 285963986 129819380 1215737151 Ratio of Input Tax Credit to Net Outward Taxable Turnover G = (C/F) 11.79 29. The DGAP had also submitted that during the course of investigation, the Respondent had mentioned the "quantity" in credit notes in positive value, as a result of which the quantity pertaining to the credit notes had been inadvertently included in the total quantity, instead of being excluded. The contention of the Respondent that duplicate sale entries had been considered in the working for November, 2017 in respect of the supplies made in the State of Maharashtra had also been examined by the DGAP and vide his Report dated 26.12.2018 he had modified his calculations and therefore the profiteered amount was reduced from Rs. 4,51,29,600/- to Rs. 2,42,82,996/- as has been given in the Table-7 below:- Table -7 S. No. State & Code (Place of Supply) Profiteering (Rs.) 1 Delhi (07) 86,34,890 2 Haryana (06) 10,41,014 3 Karnataka (29) 12,17,384 4 Maharashtra (27) ....
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....er-I and Tier 2 City Stores were same but the prices for the same products varied at the Airport Stores. For instance the price for the beverage 'Tall Latte' at the Airport Stores was Rs. 220/- while it was Rs. 205/- in Tier-1 and 2 City Stores. Similarly for the Carrot Cake with Cream Cheese' it was Rs. 240/- at the Airport Stores while it was Rs. 235/- in the other Tier-1 and 2 City Stores. The following Table submitted by the Respondent also reflected that the prices were same for the Tier-I and 2 channels while there was variation in prices for the same product sold in the Airport channel. Considering the fact that the price variation was almost Rs. 15/- or there was almost 7.3% difference in prices, it appeared from the contention of the Respondent that while comparing the City Stores prices of the product with the Airport Stores prices the DGAP should have adopted a different methodology:- Article Description Airport Stores Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Nov-17 Apr-18 Tall Latte 170 180 185 190 195 210 220 Tall Java Chip Frappuccino 200 205 210 215 225 245 255 Tall C Macchiato 195 ....
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....to reinvestigate the following issues:- i) to recalculate the average pre-rate reduction base prices separately for Tier-1 and 2 City Stores and compare them with the actual prices of the post-reduction period. ii) to recalculate the average pre-rate reduction base prices for the Airport Stores and compare them with the actual post-rate reduction prices. iii) to investigate on the basis of the evidence whether the increase in the prices made by the Respondent w.e.f. 18.04.2018 was justified. 36. The DGAP was directed to submit his Report based on the above observations after reinvestigation within a period of two months. The DGAP has accordingly, re-investigated the case and submitted his Report dated 05.02.2020 to this Authority. 37. The DGAP has stated that after receipt of the aforesaid order from this Authority, notice was issued on 23.12.2019 calling upon the Respondent to submit fresh information/documents. The Respondent has submitted his replies to the said Notice, vide letters dated 30.12.2019, 22.01.2020 and 28.01.2020. The response of the Respondent, vide the said letters, has been summed up by the DGAP as follows:- (a) The Respo....
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.... Respondent had undertaken a price increase w.e.f. 15.11.2017 which was less than the ITC loss to him. (d) The Respondent has also claimed that since the trigger for the investigation was whether there was any profiteering on account of change in the base prices due to reduction in the rate of tax (and denial of ITC) with effect from 15.11.2017, any subsequent price change should be ignored. Accordingly, the Respondent has submitted that for making the calculations for the period from 18.04.2018 to 30.06.2018, the prices should be kept constant at the 15.11.2017 price level. 38. The DGAP has also intimated that the Respondent has also submitted the following documents/information for all the 10 registrations held by him:- i. Copies of GSTR-I Returns from July, 2017 to June, 2018. ii. Copies of GSTR-3B Returns from July, 2017 to June, 2018. iii. Invoice-wise details of outward supplies reconciled with GSTR-3B Returns for the period from July, 2017 to June, 2018. iv. Submissions with regard to increase in prices w.e.f. 18.04.2018 along with supporting documents. 39. The DGAP has also submitted that es per the directions of this Autho....
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.... taxable turnover (excluding inter-unit branch transfers as per ITC Register), as per GSTR-I Returns for the period from July, 2017 to 14.11.2017, had been taken into consideration. Finally, the ratio of ITC to the net taxable turnover had been taken for determining the impact of denial of ITC (which was available to the Respondent till 14.11.2017). Accordingly, the finding was that ITC amounting to Rs. 14.33 Crore (approx.) was available to the Respondent during the period from July, 2017 to 14.11.2017 which was approximately 11.79% of the net taxable turnover of restaurant service (approx. Rs. 121.57 Crore) supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the said ITC was not available to the Respondent. A summary of the computation of ratio of ITC to the taxable turnover of the Respondent has been given in the following Table:- Table (Amount in Rs.) Particulars Jul, 2017 Aug, 2017 Sept, 2017 Oct, 2017 1st November to 14^th November, 2017 Total ITC Availed as per GSTR-3B Returns (A) 11685510 23747582 26450928 39479987 54815528 15,61,79,535 Less: Tax ....
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....al of ITC @11.79% H=F*1.1179 253.48 9. Commensurate Selling price (post Rate reduction) I=H*1.05 266.15 10. Invoice No. J 5200940041 11. Invoice Date K 21.11.2017 12. Total quantity (above invoice) L 1 13. Total Invoice Value M 267.76 14. Actual Selling price (post rate reduction N=M/L 267.76 15. Difference (Profiteering) O=N-I 1.61 44. The DGAP has further contended from the above Table that the Respondent had not reduced the selling price of the "Tier 2105246" product, commensurately when the GST rate was reduced from 18% to 5% (with denial of ITC @11.79%) w.e.f. 15.11.2017, vide Notification No. 46/2017 Central Tax (Rate) dated 14.11.2017 and hence he had profiteered an amount of Rs. 1.61 on the above item and thus the benefit of reduction in the GST rate was not passed on to the recipients by way of commensurate reduction in the price, in terms of Section 171 of the CGST Act, 2017. The DGAP has also stated that on the basis of the above calculation, profiteering in case of all the impacted items of the Responden....
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.... a year mostly in the month of April and October. The DGAP has stated that this Authority might take a view on this contention as it contained a legal point which pertained to the price revision. 47. The DGAP has also stated that the place of supply (State or Union Territory) wise break-up of the total profiteered amount of Rs. 1,04,70,664/- was as under:- Table Sr. No. State & Code (Place of Supply) Profiteering (Rs.) 1 Delhi (07) 23,55,097 2 Haryana (06) 6,74,336 3 Karnataka (29) 8,63,611 4 Maharashtra (27) 54,22,157 5 Tamil Nadu (33) 3,41,226 6 Telangana (36) 47,999 7 Uttar Pradesh (09) 2,44,497 8 West Bengal (19) 89,741 Total 1,04,70,644/- 48. The DGAP has also argued that the allegation of profiteering by way of increasing the base prices of the products, to more than offset the impact of denial of input tax credit, despite a reduction in the GST rate from 18% to 5% w.e.f. 15.11.2017 (with denial of input tax credit), stood confirmed against the Respondent. Hence, Section 171 (1) of the CGST Act, 2017 requiring that "a reduction in rate of tax on any supply of goods or ser....
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....ncreasing prices twice a year rounded off to nearest Rs. 5/- or 10/-, due to the following factors:- i. Inflationary trends relating to cost of raw material, consumables and capital expenditure; ii. Expenses such as royalty, rent, marketing expenses, etc., iii. Fuel and Power cost; iv. Purchasing power of the customer; v. Competitive pricing; vi. Regional pricing. 52. The Respondent has further submitted the trend of price increases since April, 2014 till April, 2019 as has been given in the Table below - Sr.No. Period Average percentage of price increase for food and beverages 1. April 2014 4.73% 2. July 2014 to December-2014 3.90% 3. April 2015 6.54% 4. October 2015 4.67% 5. April 2016 2.33% 6. October 2016 3.38% 7. April 2017 4.12% 8. November 2017 9-10% 9. April 2018 3.75% 10. October 2018 6% 11. April 2019 4% Based on the sample invoices, price lists and handheld menus respectively, the aforesaid consistent and continuous price increase trend for the product "Tall Latte" has been depicted by the Responden....
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....TI-PROFITEERING AUTHORITY. In the said case since M/s. Adarsh Marbles had failed to provide documentary evidence to demonstrate its stock holding period and the periodic price revision, the argument that the period considered was excessive was not accepted by this Authority. However, the Respondent being in the restaurant business has a very limited stock holding period. In the present matter, considering that the Respondent had revised his prices with effect from 18.04.2018, the DGAP ought to have adopted a period for investigation upto 17.04.2018 only. In view of the above, the Respondent has submitted that this Authority should restrict the present investigation for the period from 15.11.2017 to 17.04.2018. If it was considered, the alleged amount of profiteering would be further reduced to INR 22,77,109/- for the above period. 55. It was also submitted that in the case of Kumar Gandharv v. KRBL Ltd. 2018 (13) G.S.T.L. 412 (N.A.P.A.) = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY, this Authority has held that due to increase in the price of paddy (which was one of the raw materials) and increase in rate of GST, no benefit has been derived by the Respondent. Conside....
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....profiteering was established in respect of the product for which the complaint was filed, the investigation should be dropped 58. The Respondent has also contended that even if it was assumed that the DGAP was correct by going beyond the product referred to by the above Applicant and such benefit calculation was required to be done at the entity level, then at the entity level the ratio of loss of ITC to sales as agreed by the DGAP was ~11.79%. By applying the approach followed by the DGAP, given that the ratio of denial of ITC to sales was 11.79%, any price increase upto 11.79% was justifiable and did not amount to profiteering. Since the average price increase made by the Respondent from 15.11.2017 was ~9-10%, any question of profiteering was ruled out. In fact, the Respondent could even justify a higher average price increase above 11.79%. Hence, any allegation of profiteering was preposterous and in complete disregard of the facts. 59. It was further contended that the average prices computed for the period upto 14.11.2017 should be compared only with the average prices for the products sold from 15.11.2017. It was also submitted that vide his submissions dated 31.01.2020....
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....e customers were evident from the fact that the 'price to customer' for 'Short Capuccino' was reduced from INR 183/- to INR 179/-. 62. It was also argued that right to trade was a fundamental right guaranteed under Article 19(1 )(g) of the Constitution of India Moreover, right to trade included the right to determine prices and such right could not be taken away without an explicit authority under the law passed by the Parliament or the State legislature under Entry 34 of the Concurrent List (List Ill) of the Seventh Schedule to the Constitution of India. The Respondent has further argued that the benefit of reduced rate of GST was passed on to the customers since the GST rate of 5% has been charged instead of the erstwhile GST rate of 18%. Moreover, the basic price of 'Short Capuccino' was also reduced by the Respondent after giving effect to the increased tax cost on account of denial of input tax credit. It was also submitted that the DGAP, while determining the alleged quantum of profiteering has travelled beyond the scope of Section 171 of the CGST Act and by seeking to exercise control over the prices of the goods and/or services supplied by the Respondent. This form of pr....
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....to 14.11.2017, with the actual base prices of the said products sold during the period from 15.11.2017 to 30.06.2018. To investigate whether the Respondent had passed on the benefit of rate reduction, the DGAP had computed the ratio of denial of ITC to the Net Taxable Turnover for the period from 01.07.2017 to 14.11.2017 by taking in to account the ITC and the Turnover of the Respondent during the above period and arrived at the ratio of denial of ITC @10.83%. Accordingly, the DGAP had computed the profiteered amount in respect of those supplies where the base prices, post 15.11.2017, were increased by more than 10.83% by the Respondent. However, no profiteering was computed by the DGAP on the products the base prices of which were increased upto 10.83% to make up t loss on account of denial of ITC post rate reduction. The Respondent had argued that the actual impact of denial of ITC was 11.79% and not 10.83% as had been calculated by the DGAP. The DGAP, vide his clarifications dated 15.04.2019, had accepted the contention of the Respondent and revised the impact of denial of ITC from 10.83% to 11.79%. Accordingly, the DGAP had re-computed the profiteered amount as Rs. 2,42,82,996/....
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....es during the period from 01.07.2017 to 14.11.2017, with the actual invoice-wise base prices of the items sold in each category of Stores during the period from 15.11.2017 to 30.06.2018. The excess GST so collected from the recipients, has also been included in the aforesaid profiteered amount as the excess prices collected from the recipients also included the GST charged on the increased base prices. 66. The above mathematical methodology employed by the DGAP to compute the profiteered amount is based on the information supplied by the Respondent through his GSTR-1 and GSTR-3B Returns, details of the outward taxable supplies as well as the submissions of the Respondent and hence the same cannot be disputed by the Respondent. The above methodology is logical, reasonable, appropriate and in consonance with the provisions of Section 171 (1) of the above Act. It has also been approved by this Authority in all such cases of rate reduction where the benefit of ITC has been denied and hence, it can be safely relied upon to determine whether the benefit of tax reduction has been passed on or not. 67. It has been submitted by the Respondent that his pricing policy under which he has....
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....e month of October every year. It is also revealed that the Respondent had made increases in his prices in the months of April and October, during the years 2015 and 2016 and in the month of April, 2017. However, no increase was made by him during the month of October, 2017 and it has been claimed that he had made increase in the prices in the month of November, 2017 on the ground that he was in the process of upgrading his IT system due to implementation of the GST. The above claim of the Respondent is fallacious as the GST had come in to force w.e.f. 01.07.2017 and it cannot be accepted that the Respondent had not upgraded his IT system till 15.11.2017, keeping in view that he could not have issued even a single invoice w.e.f. 01.07.2017 without such upgradation, The Respondent on the basis of the increases made twice during the three years viz. 2015, 2016 and 2018 but not made during the year 2014, 2017 and 2019, cannot claim that he has been normally and consistently increasing his prices during the months of April and October every year. Therefore, the above claim of the Respondent is untenable. 70. It is also revealed that the Respondent has not produced even a single comp....
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....able-B furnished below:- Table-B Month Base Price in INR Airport Store Percentage Increase Tier 1 City Store Percentage Increase Tier 2 City Store Percentage Increase Apr-15 170 5.88% 155 6.45% 155 6.45% Oct-15 180 165 165 Apr-16 185 2.77% 170 3% 170 3.00% Oct-16 190 2.70% 175 2.94% 175 2.94% Apr-17 195 2.63% 180 2.85% 180 2.85% Nov-17 210 7.69% 195 8.33% 195 8.33% Apr-18 220 4.76% 205 5.12% 205 5.12% It is clear from the comparison of Table-A with Table-B that not even a single price increase tallies with each other during the period when it has been claimed to have been made. Whereas the Respondent has claimed to have increased his prices by 9-10% in November, 2017 the actual increase has been shown as 7.69% for the Airport Stores and 8.33% for the Tier 1 and 2 City Stores. The Respondent has not submitted any comprehensible comparison chart based on the invoices which could establish that he had increased his prices as per his pricing policy twice every year. Therefore, the claim of trend of increase in ....
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.... 7.14 8.88 8.16 1.88 Tier 1 City Store Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Nov-17 Apr-18 Tall Latte 155 165 170 175 180 195 205 Increase (%) 6.45 2.94 2.85 2.77 8.33 5.12 Tall Java Chip Frappuccino 185 190 195 200 210 230 240 Increase (%) 2.7 2.63 2.56 5 9.52 4.34 Tall C Macchiato 190 200 205 210 225 245 250 Increase (%) 5.26 2.5 2.43 7.14 8.16 2.04 Tier 2 City Store Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Nov-17 Apr-18 Tall Latte 155 165 170 175 180 195 205 Increase (%) 6.45 2.94 2.85 8.33 5.12 Tall Java Chip Frapuccino 185 190 195 200 210 230 240 Increase (%) 2.7 2.63 2.56 5 9.52 4.34 Tall C Macchiato 190 200 205 210 225 245 250 Increase (%) 5.26 2.5 2.43 7.14 8.16 2.04 75. The Respondent has also submitted copies of the printed Menu at page 183-210 of his submissions dated 13.08.2020 to claim ....
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....is Authority in the case of Mohammad Azid Ramzani & another v. M/s. Adarsh Marbles 2019-TIOL-42 NAA-GST = 2019 (6) TMI 1337 - NATIONAL ANTI-PROFITEERING AUTHORITY in his support on the ground that he was having very limited stock holding period and he had increased his prices w.e.f. 18.04.2018 and hence the investigation should be carried out till 17.04.2018 only. As has been discussed above the Respondent has not passed on the benefit of tax reduction any time in the post reduction period and he still continues to be in violation of the provisions of Section 171 (1) and hence he is required to be investigated even at this stage. Hence, the period of investigation can neither be limited to 17.04.2018 nor the profiteered amount can be reduced to Rs. 22,77,109/-. The facts of the above case cited by the Respondent are not different than that of the Respondent as he has also failed to produce any evidence to show that he has made periodical increases in his prices and hence the above case does not help the Respondent. 80. It was also submitted that in the case of Kumar Gandharv v. KRBL Ltd. 2018 (13) G.S.T.L. 412 (N.A.P.A.) = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY,....
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....Respondent has further claimed that the investigation ought to have been restricted to the product in respect of which the complaint was made and it could not have been expanded to include all the products sold by him. In this context it is clear from the perusal of Sub-Section 171 (1) that both the benefits of tax reduction and ITC are required to be passed on by the suppliers to the buyers by commensurate reduction in the prices as they are the concessions which have been granted to them from the public exchequer in the interest of the buyers. Sub-Section 171 (2) provides that the Central Government may on the recommendations of the GST Council constitute an Authority to examine whether the input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the prices of the goods or services or both supplied by him. Therefore, this Authority has jurisdiction to examine all such cases in which the above benefits are required to be passed on suo moto or to get them investigated through the DGAP and its power to do so is not circumscribed by any restriction to the effect that it cannot examine those cases in resp....
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....und to bring before this Authority all such cases in which both the above benefits have not been passed on irrespective of the fact whether any complaint has been received concerning them or not once they have come to his notice. The Respondent cannot be allowed to deny benefit of rate reduction to the other buyers under the above pretext and misappropriate the amount of benefit of ITC which he is not to pay from his pocket. Accordingly, the DGAP has rightly investigated the benefit of rate reduction to be passed on to the other buyers on the products other than the complained product after giving him due notice under Rule 129 (3) and hence, the investigation conducted by him in this regard is legal and is in consonance with the provisions of Section 171 and the Rules framed under Chapter XV of the CGST Rules, 2017 and therefore, the above claim of the Respondent is not correct and hence, it cannot be accepted. 84. The Respondent has also cited the case of Crown Express Dental Lab v. Theco India Private Limited 2018-TIOL-14-NAA-GST = 2018 (12) TMI 135 - NATIONAL ANTI-PROFITEERING AUTHORITY in which the DGAP had restricted his investigation in respect of the machine in respect of....
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.....2020 which shows that the Respondent has increased his prices by more than 11 .79%, the permissible limit upto which he could have increased them to offset the denial of ITC. Accordingly, the above contention of the Respondent is not correct. 86. It was further contended that the average prices computed for the period upto 14.11.2017 should be compared only with the average prices for the products sold from 15.11.2017. In this regard it would be pertinent to mention that it was essential to compute the pre rate reduction average base price of each product being supplied by the Respondent as he was not selling it on the same price to the various customers and the impact of differential pricing and spot discounts offered by the Respondent on a case to case basis was required to be taken in to account. It was not possible to compare the pre rate reduction average base prices with the post rate reduction average base prices as the benefit is required to be passed on each product to each customer on the basis of the actual price paid by each buyer post rate reduction and therefore, the amount of benefit is required to be computed on each product on the actual price being charged to ....
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...."any supply" which means each taxable supply made to each buyer thereby making it evident that a supplier cannot claim that he has passed on more benefit to one customer therefore he would pass less benefit or no benefit to another customer than what is actually due to that customer. Each customer is entitled to receive the benefit of tax reduction or ITC on each product or unit or service purchased by him of course subject to his entitlement. The word "commensurate" mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the prices which has to be computed in respect of each product or unit or service based on the tax reduction or the additional ITC which has become available to a registered person after coming in to force of the CGST Act, 2017. Accordingly, the benefit of additional ITC would depend on the comparison of the ITC/CENVAT which was available to a builder in the pre-GST period with the ITC available to him in the post GST period w.e.f. 01.07.2017. Computation of commensurate reduction in prices is purely a mathematical exercise which is based upon the above parameters and hence it would vary from product to product or u....
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....ovisions of Section 171 (1) which are abundantly clear, unambiguous, mandatory and legally enforceable, The above provisions also reflect that the true intent behind the above provision, made by the Central and the State legislatures in their respective GST Acts is to pass on the above benefits to the common buyers who bear the burden of tax. The Respondent is trying to mislead by wrongly claiming that he was required to carry out complex mathematical computations for passing on the benefit of tax reduction which he could not do in the absence of the procedure and methodology. His claim is absolutely incorrect as he was only required to maintain the pre rate reduction base price of each product being sold by him and then to add 11 .79% of the base price in the base price of the product and then charge reduced rate of GST of 5% in the post rate reduction period. However, the Respondent is misappropriating the above benefit by utilising it in his business and is enriching himself at the expense of the vulnerable customers. Hence, no methodology and procedure or guidelines or elaborate mathematical calculations are required to be prescribed separately for passing on the benefit of rat....
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....undamental right guaranteed under Article 19(1)(g) of the Constitution of India which included the right to determine prices which could not be taken away. In this context it would be appropriate to state that there is no provision under Section 171 of the above Act to regulate prices of the products being sold by the Respondent and the mandate of the above Section is limited to the extent pf passing on the benefits of tax rate reduction and ITC. Neither the DGAP or this Authority has tried to act as a price controller or price regulator nor there is any such power vested in them. The Respondent is free to fix his prices and carry out his business operations as per the right guaranteed to him under the above Article. However, under the pretext of the above right he cannot trample upon the right of the buyers to get the benefit of tax reduction. The contention of increase in the cost cannot be applied to deny the above benefit and therefore, the above claim of the Respondent cannot be accepted. 91. The Respondent has further argued that the benefit of reduced rate of GST was passed on to the customers since the GST rate of 5% has been charged by him instead of the erstwhile GST r....
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....o the buyers by commensurately fixing prices of his products after taking in to account the impact of denial of ITC, which he has not done and hence he has violated the provisions of Section 171 (1) of the CGST Act, 2017. Accordingly, as per the provisions of Section 171(2) of the above Act read with Rule 133 (1) of the CGST Rules, 2017 the profiteered amount is determined as Rs. 1,04,70,664/-. The details of the computation have been given in Annexure-4 of the DGAP's Report dated 05.02.2020. The State wise profiteered amount has been mentioned in the Table given below:- Table Sr.No. State & Code (Place of Supply) Profiteering (Rs.) 1 Delhi (07) 23,55,097 2 Haryana (06) 6,74,336 3 Karnataka (29) 8,63,611 4 Maharashtra (27) 54,22,157 5 Tamil Nadu (33) 3,41,226 6 Telangana (36) 47,999 7 Uttar Pradesh (09) 2,44,497 8 West Bengal (19) 89,741 Total 1,04,70,664/- 94. Accordingly, the Respondent is directed to reduce the prices of his products as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit of tax red....