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2018 (4) TMI 1377 - NAPA - GSTProfiteering - Reduction on rate of tax post GST - Honda Car having Model No. WR-V 1.2 VX MT (i-VTEC) - whether the rate of tax on the car had been reduced post-GST and if so, whether there was substantial reduction in the rate of tax as had been contended by the applicant and whether the benefit of reduction in rate of tax had been passed on to the applicant? - Held that - Section 171(1) of the Central Goods and Service Tax, 2017 requiring 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 the recipient by way of commensurate reduction in prices has not been contravened in the present case. The rate of tax both during pre-GST era as well as the post GST era was a matter of fact which has been clearly delineated in detail by the DGSG in his report dated 23.02 2018. It has also been found that the applicant s contention that the pre-GST rate of tax which was 51% was reduced to 29% in post GST era, was factually incorrect as the pre-GST rate of tax, on the car contracted to be purchased by the applicant, was leviable at 31.254% which was rationalized to 29% (CGST-14% SGST-14% Cess-1%)thus there was a reduction of only about 2% - the benefit of reduction in the tax rate was passed on to the applicant by way of reduction in the price of the car of base colour by an amount of ₹ 10,550/-. Whether any input tax credit benefit was to be passed on to the applicant by the respondent? - Held that - the respondent has given details of all the basic components of the price of the car purchased by the applicant as has been mentioned in Table B above and benefit of ₹ 10,550/- on account of reduction of tax by about 2% viz. from 31.254% (pre GST) to 29% (post GST), as discussed above, has already been passed on to the applicant and the amount of ₹ 10,550/- is inclusive of the ITC as has been calculated in Table B - no additional benefit on account of ITC is required to be paid by the respondent. The respondent has not contravened the provisions of Section 171 of the CGST Act, 2017 - application dismissed.
Issues Involved:
1. Whether there was a substantial reduction in the rate of tax on cars post-GST and if the benefit of such reduced tax rate was passed on to the applicant. 2. Whether any input tax credit benefit was to be passed on to the applicant by the respondent. Issue-wise Detailed Analysis: 1. Reduction in Rate of Tax Post-GST: The applicant claimed that the pre-GST tax rate on the car was 51%, which was reduced to 29% post-GST. The respondent countered this by stating the pre-GST tax incidence was only 29.175%. The Director General of Safeguards (DGSG) investigated and found that the actual pre-GST tax rate was 31.254%, reduced to 29% post-GST, resulting in a reduction of about 2%. The DGSG confirmed that the applicant booked a car at an ex-showroom price of ?9,13,300/- (pre-GST) but took delivery of a different color car at a reduced ex-showroom price of ?8,98,750/- (post-GST). The DGSG concluded that the respondent had correctly passed on the benefit of the reduced tax rate to the applicant by reducing the car price by ?10,550/-. The applicant inspected the respondent's documents and expressed satisfaction with the response, leading to the closure of the case. 2. Input Tax Credit (ITC) Benefit: The applicant did not initially mention the ITC benefit in his application but later requested clarification on the ITC amount to be passed on. The DGSG's report and the Authority clarified that the GST scheme is ITC-based, meaning the recipient takes credit of GST paid on purchases and uses it to discharge GST output tax liability. The respondent had already passed on a benefit of ?10,550/- due to the tax rate reduction, inclusive of ITC. Therefore, no additional ITC benefit was required to be passed on to the applicant. The applicant's contention regarding ITC was found to be invalid and was rejected. Conclusion: The Authority determined that the respondent did not contravene Section 171 of the CGST Act, 2017, which mandates passing on the benefit of reduced tax rates to the recipient. The application was dismissed, and the case was closed with no merit found in the applicant's claims.
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