TaxTMI 
TaxTMI 
2026 (2) TMI 1099
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....iteered an amount of Rs.13,32,322/- during the period 15.11.2017 to 30.09.2017 by not passing on the benefit commensurate to reduction of GSTR rate from 18% to 5% without input tax credit on supply of restaurant services with effect from 15.11.2017. 3. The Respondent is a registered supplier of restaurant services and has been operating a 'Subway' franchise outlet at Amanora Mall, Pune, Maharashtra, since the year 2016. The Respondent conducted its business under a standard franchise agreement entered into with M/s Subway Systems India Pvt. Ltd. (hereinafter referred to as "Subway India"). 4. An application was filed before the Standing Committee on Anti-Profiteering alleging that the Respondent had indulged in profiteering in contravention of Section 171 of the CGST Act, despite reduction of the GST rate on restaurant services from 18% to 5% (without input tax credit) with effect from 15.11.2017. 5. The said application was examined by the Maharashtra State Level Screening Committee, which observed that the Respondent had not passed on the commensurate benefit of reduction in tax rate to the recipients. Consequently, the matter was forwarded to the Standing Committee on A....
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....14.10.2022 submitted by the DGAP. 16. Pursuant thereto, the Respondent filed its written submissions vide letter dated 16.10.2025 before this Tribunal, contesting the findings recorded by the DGAP. 17. Shri Nikhil Gupta learned counsel, assisted by Shri Rochit Abhishek, appeared on behalf of the Respondent and advanced submissions. 18. It is submitted that, owing to operational and commercial challenges, the Respondent has since closed its outlet at Amanora Mall, Pune. It is further submitted that the Respondent operated the said outlet under the following commercial terms with Subway India and various online food aggregators: (a) Royalty @ 8% of the base price of sales was payable to Subway India, (b) Advertisement Contribution @ 4.5% of the base price was payable to Subway India, (c) Lease Rent @ 9%-10% of the monthly revenue (on base price), subject to a minimum guarantee amount payable to Subway India, (d) Common Area Maintenance (CAM) charges of Rs.41,914/- per month, (e) Combined commission averaging 22.7% per transaction payable to online aggregators (such as Swiggy, Zomato, Uber Eats and Food Panda), comprising platform ....
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..../- is about 7.40%, exceeding the threshold of 4.38% and hence, such calculations are incorrect. 24. It is submitted that the Respondent had increased the base price of its products by approximately 13% on average, whereas the loss of ITC alone ranged between 10% to 11%, on direct incremental costs such as royalty, commission, advertisement expenses, rentals, and periodical capital expenditure. There was a significant increase in other cost component effective from 15.11.2017 including the above-mentioned expenses. 25. Learned counsel further submitted that the minimum cost incurred by the Respondent had increased by approximately 12.69% as elucidated in the tabulated statement below: Description Extra Cost ITC Loss Total ITC Loss as per DGAP (without prejudice) 8.21% 8.21% Incremental Royalty 1.04% 0.12% 1.16% Incremental Advertisement Contribution 0.59% 0.11% 0.69% Incremental Lease Rent 1.17% 0.21% 1.38% Incremental Commission for online Partners 1.05% 0.19% 1.24% Total 3.85% 8.84% 12.69% 26. On the basis of the aforesaid table, it is submitted that against reduction in GST rate of....
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....e Respondent failed to furnish any documentary evidence in support of its claim of erroneous computation of ITC loss. The methodology adopted by the DGAP to arrive at loss of ITC @ 8.21% is correct. The computation of profiteered amount Rs.13,32,322/- was carried out basis the sales data furnished by the Respondent for the period from 15.11.2017 to 30.09.2019. 33. Perused the record. 34. Section 171 of the CGST Act reads thus: "Section 171 Anti-profiteering measure.- (1). Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. (2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. Provided that the Government may by notification, on the recommendations of the Council,....
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....e limitation. 37. Per contra, the learned Representative of the DGAP submitted that the time limit as provided for the Rule 133 of the CGST Rules is discretionary in nature. 38. The Hon'ble Apex Court in P. T Rajan v. T.P.M Sahir and others, AIR 2003 SC 4603, held that even if the statute specifies a timeline for publication of the electoral roll, it would be directory. The Hon'ble Court observed: "48. Furthermore, even if the statue specifies a time for publication of the electoral roll, the same by itself could not have been held to be mandatory. Such a provision would be directory in nature. It is well settled principal of law that where a statutory functionary is asked to perform a statutory duty within the time prescribed therefore, the same would-be directory and not mandatory" (Emphasis added) 39. The Division Bench of Hon'ble High Court of Delhi in Nestle India Ltd. v. Union of India, WP (C) 969/2020, held that; - "We also observe that prima facie, it appears to us that the limitation of six months provided in Rule 133 of CGST Rules, within which the authority should make its order from the date of receipt of the report of the Directorate....
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.... recipients by way of commensurate reduction in prices, as required under Section 171 of the CGST Act. 43. Admittedly, the Respondent increased the base price of 6'' Aloo Patty and 6'' Hara Bhara Kabab on 15.11.2017. Vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017, applicable rate of GST on supply of restaurant service was reduced from 18% to 5% w.e.f. 15.11.2017. Suffice to say the increase in base prices of the aforesaid products coincided with the very date on which reduced rate of tax of 5% became effective. 44. Shri Nikhil Gupta, learned counsel for the Respondent contended that the minimum increase in cost was approximately 12.69%, including loss of input tax credit arising out of the reduction in the rate of tax. It was further argued that, since the DGAP itself computed the loss of ITC at 8.21%, the Respondent was entitled to correspondingly increase the base prices of 6'' Aloo Patty and 6'' Hara Bhara Kabab to the extent of 8.21%. He vehemently argued that on account of incremental royalty, increased advertisement contribution, enhanced lease rent, and higher commission payable to online aggregators, the Respondent was constrained to increase the ba....
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....e) [2025] 177 taxmann.com 376 (GSTAT - NEW DELHI), relying upon the observation made by the Hon'ble High Court of Delhi in Reckitt Benckiser India Pvt. Ltd. v. Union of India (supra) held that cogent, clear and un-equivocal evidences or materials must be brought on record to rebut a presumption that every reduction in the rate of GST is required to be passed on to consumers by way of commensurate reduction in prices. The Tribunal observed as under: "26. In Paragraph 119, the High Court of Delhi express that in agreement with the submission of learned Amicus Curiae that if there is any variation on account of other factors, such as any costs necessitating the setting off of such reduction of price, the same needs to be justified by the supplier. The inherent presumption that these must necessarily be a reduction in prices of the goods and services is a rebuttable presumption. It is clarified that if the supplier is to assert reasons for offsetting the reduction, it must establish the same on cogent basis and must not use it merely as a device to circumvent the statutory obligation of reducing the prices in a commensurate manner contemplated under Section 171 of the Act. ....
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....ute again about the period of investigation. 51. In view of the foregoing, we are of the view that the Respondent increased the base price of 6'' Hara Bhara Kabab and 6" Aloo Patty on 15.11.2017, on the date when the notification for reduction in rate of tax came into force. As a result, the Respondent had indulged in profiteering by not passing on the benefit of reduction of rate of tax to the consumers by way of commensurate reduction in prices in terms of Section 171 of the CGST Act. 52. Learned Counsel for the Respondent agitated that interest cannot be levied for any period prior to the introduction of the statutory provision enabling imposition of interest under Rule 133(3)(c) of the CGST Rules. It was therefore submitted that the Respondent is not liable to pay interest on the profiteered amount computed by the DGAP. 53. Rule 133(3)(c) of the CGST Rules, 2017 is reproduced here: - "(c) the deposit of an amount equivalent to 50% of the amount determined under the above clause (along with the interest at the rate of 18 percent from the date of collection of the higher amount till the date of such amount) in the fund constituted u/s 57 of the Goods and Service....