2019 (3) TMI 753 - NAPA - GST

Profiteering - supply of Little Stars Dhoti (5-6) - benefit of reduction in the rate of tax at the time of implementation of GST not passed on - contravention of the provisions of Section 171 of CGST Act, 2017 - Held that - It is apparent from the perusal of the facts of the case that there was no reduction in the rate of tax on the above product w.e.f. 01-07-2017 and that the rate of tax in the Post-GST era has also been increased from CST @ 2% to IGST @ 5%, therefore, the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017 as there has been no reduction in the rate of tax. Application dismissed - decided against petitioner.

Summary

Issues:
Allegation of profiteering by the Respondent on the supply of a specific product by not passing on the benefit of tax rate reduction post-GST implementation.

Analysis:
1. The case was referred to the Directorate General of Anti-Profiteering (DGAP) by the Standing Committee on Anti-profiteering based on allegations of profiteering by the Respondent. The Kerala State Screening Committee highlighted two invoices, one pre-GST and one post-GST, to support the claim.
2. The DGAP conducted detailed investigations and reported that the tax rate on the product increased from 2% in the pre-CST era to 5% post-GST. However, the base price of the product remained constant at ?265 in both periods.
3. The DGAP clarified that as per Section 171 of the CGST Act, 2017, if there is no reduction in the tax rate, the provision regarding passing on the benefit does not apply. Therefore, since there was no reduction in the tax rate for the product, the allegation of profiteering was deemed unsubstantiated.
4. The Authority reviewed the DGAP's report and decided to address the issue of Maximum Retail Price (MRP) which had not been previously considered. Subsequently, the DGAP was instructed to reinvestigate the matter specifically concerning MRP.
5. Upon re-investigation, the DGAP reiterated that the rate of tax increased post-GST, and the base price of the product remained unchanged. The incidence of IGST at 5% post-GST was higher than the pre-GST incidence of CST at 2%, further supporting the conclusion that Section 171 of the CGST Act, 2017 did not apply due to the absence of a tax rate reduction.
6. The final decision by the Authority was based on the absence of any reduction in the tax rate post-GST implementation, leading to the dismissal of the application alleging profiteering by the Respondent. The order was to be communicated to all parties involved, and the case file was to be closed after due process.