GST: ANTI-PROFITEERING PROVISIONS NOT ATTRACTED WHEN TAX RATE INCREASED

[Dr. Sanjiv Agarwal]

Recently there was a complaint of profiteering examined by the National Anti-profiteering Authority (NAA) against the largest motor car manufacturer in India, i.e. Maruti Suzuki India Ltd. in Kerala State Screening Committee on Anti-profiteering and DGAP, New Delhi v. Maruti Suzuki India Ltd. reported in 2019 (1) TMI 139 - NATIONAL ANTI-PROFITEERING AUTHORITY
;.  Based on the facts as discussed hereunder, it was held that there was no case of profiteering in contravention of section 171 of the CGST Act, 2017 against M/s Maruti Suzuki India Ltd.

In the instant complaint, it was alleged that the company (Maruti) indulged in profiteering on supply of various models of motor cars, viz, Wagon R VXI AMT, Swift VXI, Alto 800 LXI and Wagon R VXI under HSN Code 8703 by not passing on the benefit of reduction in the rate of tax when GST was implemented w.e.f. 1.7.2017. The complaint was based on two invoices issued for these four models in pre –GST and post-GST regime as tabulated below:  

Particulars	Wagon R AMT		Swift VXI (O)		Wagon R VXI		Alto 800 LXI
	Pre-GST	Post-GST	Pre-GST	Post-GST	Pre-GST	Post-GST	Pre-GST	Post-GST
Invoice No.	11809050	11931762	11608607	1143723	11614808	1130822	11618491	1124140
Invoice Date	02.06.17	19.07.17	03.04.17	15.09.17	04.04.17	19.09.17	05.04.17	15.09.17

Based on scrutiny of invoices, DGAP observed that in pre-GST era before 1.7.2017, these cars attracted a total tax incidence of 15.63% comprising of following taxes :

Central Excise Duty                           -           12.5%

Central Sales Tax (CST)                    -           1%

National Calamity Contingent Duty    -           1%

Auto Cess                                          -           0.125%

Infra Cess                                          -           1%

VAT was also levied in pre-GST regime. In GST regime, total GST was fixed @ 29% which included 14% CGST, 14% SGST and Compensation Cess @ 1%.

There was also a scheme of discount offered product wise by the company. Thus, there was an increase in rate of tax from 15.63% to 29% in GST regime. The selling price was increased primarily due to tax burden going up from 15.63 to 29%,  leading to increase in cum-tax price. In both periods, it remained an inter-State supply. The scrutiny by DGAP also revealed that the company changed net base price (post-discount) and charged effective rate of tax in GST regime as per below table:

Motor Car model	Pre-GST net base price (in Rs.)	Post-GST net base price (in Rs.)	Increase/(Decrease) post-GST (in Rs.)	Increase/ (Decrease) post-GST (in%)
A	B	C	D=(C-B)	E=D/B
Wagon R AMT	3,28,023	3,28,213	190	0.06%
Swift VXI (O)	4,02,377	4,02,587	210	0.05%
Wagon R VXI	3,03,681	3,00,228	(3,453)	(1.14%)
Alto 800 LXI	1,96,728	1,95,641	(1,087)	(0.56%)

From the above, it revealed that price of two models went up but in two cases, it was reduced which was negligible and mainly on account of reduction of discount with base price remaining the same.

DGAP also opined that the anti-profiteering provisions are attracted only when there is a reduction in the rate of tax or increase in the input tax credit and therefore in the present case as there has been no reduction in the rate of tax, the allegation of profiteering by the company was not established.

Based on facts and documents on record and DGAP report followed by adjudication, the NAA examined as to whether there was any reduction in the rate of tax during the implementation of the GST and whether the benefit of reduction in the rate of tax was passed on or not to the recipient as provided under Section 171 of the CGST Act, 2017.

It observed that rate of tax was 15.63 in pre-GST era which want upto 29% in post-GST era. Further, it was evident from the invoices that base price of all the products before discount had remained the same. The NAA thus concluded that the company had not contravened the provisions of section 171 of the CGST Act, 2017 and the complaint had no merit and hence dismissed.