2018 (12) TMI 1002 - NAPA - GST

Profiteering - purchase of one Honda City Car - benefit of Input Tax Credit (ITC) was not passed on - benefit of reduction in the rate of tax - contravention of the provisions of Section 171 of the CGST Act 2017. Reduction in the tax rates - Held that - It is clear from the DGAP s investigation report that there was no reduction in the tax rate in this case hence the allegation of profiteering by the Respondent on account of change in tax rate is not sustainable. Benefit of ITC - Held that - The record also reveals that the base price charged by the Respondent in the post-GST sale invoice dated 14.10.2017 was Rs. 1, 73, 346/- less than the base price in the preGST sale invoice dated 28.04.2017 due to the reason that in the preGST period the credit of Excise Duty NCCD and Cesses etc. was not available to the Respondent as only credit of VAT was admissible while in the post-GST period the Respondent was entitled to claim the ITC on the entire GST paid @ 45% and when the post-GST purchase invoice dated 29.09.2017 and sale invoice dated 14.10.2017 issued by the Respondent were compared it was evident that the Respondent had not passed on the burden of the input GST paid @ 45% amounting to Rs. 2, 88, 661.95/- to the Applicant due to the reason that he was eligible to claim ITC on this amount. It is also clear that there was increase in the ITC which the Respondent could avail in the post-GST era as compared to the pre-GST era and the pre-GST and post-GST sale invoices issued by the Respondent revealed that the base price charged from the above Applicant had been reduced as the benefit of ITC was passed on by the Respondent to the Applicant No. 1. Therefore the allegation that the Applicant had not been given the benefit of ITC by the Respondent was not proved. The provisions of Section 171 (1) of the CGST Act 2017 have not been contravened in the present case - the application filed by the Applicant No. 1 requesting for action against the Respondent for violation of the provisions of the Section 171 (1) of the CGST Act 2017 is not maintainable and hence the same is dismissed - application dismissed.

Summary

Issues Involved:
1. Violation of Section 171 of the CGST Act, 2017.
2. Quantum of profiteering, if any.

Detailed Analysis:

1. Violation of Section 171 of the CGST Act, 2017:

The primary issue was whether the Respondent violated Section 171 of the CGST Act, 2017, which mandates that any reduction in the tax rate or benefit of Input Tax Credit (ITC) should be passed on to the recipient by way of commensurate reduction in prices. The Applicant alleged that despite purchasing a car post-GST implementation, the Respondent did not pass on the ITC benefit.

The investigation revealed that the Respondent's profit margin decreased from Rs. 28,589 pre-GST to Rs. 16,621 post-GST, even after considering trade discounts. The DGAP's report showed that the post-GST purchase price was Rs. 6,906.05 less than the pre-GST purchase price, and the post-GST sale price was Rs. 15,683.50 less than the pre-GST sale price. The base price charged in the post-GST era was Rs. 1,73,346 less than the pre-GST base price due to the availability of ITC on the entire GST paid at 45%, which was not available in the pre-GST era.

The DGAP concluded that there was an increase in ITC available to the Respondent post-GST, and the base price charged from the Applicant was reduced accordingly, indicating that the benefit of ITC was passed on. Therefore, the allegation of not passing the ITC benefit was not substantiated.

2. Quantum of Profiteering:

Since the investigation established that there was no violation of Section 171, the issue of determining the quantum of profiteering became moot. The DGAP's report and the Authority's analysis confirmed that the Respondent had indeed passed on the benefit of ITC to the Applicant, resulting in a reduced base price post-GST.

Conclusion:

The Authority concluded that the provisions of Section 171 (1) of the CGST Act, 2017, were not contravened. The application alleging profiteering was dismissed as the Respondent had passed on the ITC benefit, resulting in a commensurate reduction in the car's price. The detailed examination of invoices and profit margins substantiated this conclusion, leading to the dismissal of the application.