CASES THAT NOT AMOUNT TO PROFITEERING

[Mr. M. GOVINDARAJAN]

Anti Profiteering Measure

Section 171(1) of the Central Goods and Services Tax Act, 2017 provides that 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.

Section 171 deals with two situations-

• one relating to the passing on the benefit of reduction in the rate of tax; and
• the second pertaining to the passing on the benefit of ITC.

In this articles some of the case laws are discussed in which cases the anti-profiteering has not been attracted.

Change in tax rate

There may be circumstances for change of tax rate as detailed below-

• Reduction of tax rate in the post GST period than the pre GST period;
• Reduction of tax rate in the post GST period after 01.04.2017 by the decision taken by the GST Council in the meeting.There are many occasions the Council reduced rates of taxes.Recently the Council recommended reducing the tax from 28% to lower rates.

In ‘State Level Screening Committee on Anti-Profiteering, Kerala v. Panasonic India Private Limited’ – 2018 (12) TMI 1403 - NATIONAL ANTI-PROFITEERING AUTHORITY the Standing Committee alleged profiteering by the respondent on the supply of ‘Panasonic LED TH43E200DX#45880’ by not passing the benefit of reduction in the rate of tax at the time of implementation of GST with effect from 01.07.2017.  The Standing Committee relied on two invoices issued by the respondent on 15.06.2017 and the other on 22.07.2017 (post GST).  On the scrutiny of the said invoices the DGAP has informed that there was an increase in the rate of tax on the said product from 26.79%  in the pre GST era to 28% in the GST period and there was no reduction of tax.  The Authority held that the allegation of non profiteering is not sustainable and dismissed the application filed against the respondent.

In ‘Shylesh Damodaran v. Landmark Automobiles Private Limited’ – 2018 (12) TMI 1002 - THE NATIONAL ANTI-PROFITEERING AUTHORITY, the Authority found that from the DGAP’s investigation report that there was no reduction in the tax rates, the allegation of profiteering by the respondent on account of change in rate is not sustainable.

In ‘State Level Screening Committee on Anti Profiteering, Kerala v. Zeba Distributors’ – 2018 (12) TMI 1001 - THE NATIONAL ANTI-PROFITEERING AUTHORITY, it was alleged profiteering by the respondent on the supply  of ‘Eastern Meat Masala’ (HSN Code No.0910) by not passing on the benefit of reduction in the rate of tax at the time of implementation of GST.  The DGAP has intimated that there was no reduction in the rate of tax on the product which was 5% both in the pre-GST era well as in the post GST era.  The respondent did not increase the per unit base price (excluding tax) of the product which was ₹ 238/- during both the periods.  The Authority held that the provisions of anti-profiteering would not attract in the case of the respondent.  There is also no increase in the per unit base price (excluding tax) of the above product and therefore the allegation of profiteering is not sustainable.

In ‘Kerala State Screening Committee on Anti-Profiteering V. Janson’- 2018 (12) TMI 1600 - NATIONAL ANTI-PROFITEERING AUTHORITY it was alleged anti-profiteering by the respondent on the supply of ‘Handloom Design King Supreme Lungi’ (HSN Code 54078460) by not passing the benefit of reduction in the rate of tax at the time of implementation of GST.  The DGAP intimated that the applicable VAT was NIL and the Central Excise duty on the product was exempted.   In the post GST era the rate of tax is 5%.  There was no reduction in tax rate.  Actually there is an increase in the rate of tax.  The Authority held that the provisions of anti-profiteering would not attract in this case.

 No change in base price

In ‘Kerala State Screening Committee on Anti-Profiteering v. Asian Granito India Limited’ – 2018 (12) TMI 1401 - NATIONAL ANTI-PROFITEERING AUTHORITY, it was alleged anti-profiteering by the respondent on the supply of ‘Granure Hard Nero-10MM & Granure Hard Crema – 10 MM Tiles’ by not passing on the benefit of reduction in the rate of tax of GST with effect from 15.11.2017 from 28% to 18%. The Authority found from the report that the sale price of these products was reduced from ₹ 1037.52 (pre GST revision) to ₹ 840.68 (post GST revision) when the GST rate on the above items was revised from 28% to 18%.  Thus it is clear that the base prices have not been changed and accordingly the selling prices of the products have been reduced.  The respondent has duly passed on the benefit of reduction of tax rate by the keeping the base price constant thus reducing the selling price of the products in question.  Therefore the anti profiteering provisions are not attracted.

Passing on the benefit of ITC

In ‘Shylesh Damodaran v. Landmark Automobiles Private Limited’ – 2018 (12) TMI 1002 - THE NATIONAL ANTI-PROFITEERING AUTHORITY, the Authority found that the base price charged by the respondent in the post GST sale invoice dated 14.10.2017 was ₹ 1,73,346/- less than the base price in the pre-GST sale invoice dated 28.04.2017 du to the reason that in the pre-GST 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 has not passed on the burden of the input GST paid @ 45% amounting to ₹ 2,88,661.95 to the applicant due to the reason that he was eligible to claim ITC on this amount.  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 applicant had been reduced as the benefit of ITC was passed on by the respondent to the applicant.  Therefore the allegation that the applicant had not been given the benefit of ITC by the respondent was not proved.  The Authority dismissed the application of the applicant.

 Reduction in discount

In ‘Kerala State Screening Committee on Anti-profiteering v. Asian paints Limited’ – 2019 (1) TMI 21 - NATIONAL ANTI-PROFITEERING AUTHORITY it was alleged anti profiteering by the respondent on the supply of the product ‘Paint [AP Apex Classic WT 10 LT (HSN Code 3209)] by not passing the benefit of reduction in the rate of tax of GST at the time of its implementation.  The Authority found that the respondent has increased the sale price of the product from ₹ 1855.05 to ₹ 1859.55 resulting in the increase of ₹ 4.50.  It is apparent that the post GST price before discount has been reduced from ₹ 2159/- to ₹ 1927/-.  Also the discount offered has been reduced from ₹ 75.57 to ₹ 67.45 i.e., by ₹ 8.12 and hence post GST, there is increase in the base price of ₹ 4.50.  The increase in the base price is on account of the reduction in the discount.  The reduction in discount does not amount to profiteering as the same was offered from his profit margin by the respondent and does not form part of the base price  and therefore the respondent cannot be held guilty under section 171 of the Act.