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TMI Blog2019 (5) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... reduction in tax has to be necessarily passed on to the recipient by commensurately reducing the prices - Secondly the argument that the pre GST prices and the post reduction prices should have been compared will also not hold good as the DGAP has rightly taken into consideration the prices before the rate reduction and the prices after the reduction of tax rates to analyse and estimate the extent of benefit passed on to the recipient. The amount shall be deposited within a period of 3 months by the Respondent, from the date of receipt of this order, failing which the same shall be recovered by the corresponding field formations of Central and State GST Authorities, as per the provisions of the CGST/SGST Act, 2017 - The Authority as per the provisions of Rule 136 of the CGST Rules, 2017 also directs the respective Commissioners of CGST/SGST to monitor the implementation of this order. Penalty - HELD THAT:- The Respondent had issued incorrect invoices while selling all the above product to his customers as he had not correctly shown the basic price which he should have legally charged from them. The Respondent had also compelled them to pay additional GST on the increased pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te revision after 15.11.2017 Difference (in Rs.) Invoice No. Date GST rate Price excluding GST (in Rs.) Invoice No. Date GST rate Price excluding GST (in Rs.) KitHood Curved Black- 90 Cm GKH 900CS Electric Chimney(HSN84146000) 67 dated 30.08.2017 28% 6113.79 107 dated 18.12.2017 18% 7369.20 1255.41/- 2. The above reference was examined by the Standing Committee on Anti-Profiteering and was further referred to the DGAP vide minutes of its meeting dated 02.07.2018 for detailed investigations under Rule 129 (1) of the CGST Rules, 2017. 3. A notice under Rule 129 of the CGST Rules, 2017, was issued on 05.09.2018, by the DGAP, calling upon the Respondent to reply as to whether he admitted that he had contravened the provisions of Section 171 of the CGST Act, 2017 and that the benefit of reduction in GST rate had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,995.00 Sale price to end consumer (Rs.) 10,070.00 8,995.00 9,995.00 Dealer Price factor (%) .87 .87 .87 Sale price to dealer (Rs.) 8,760.90 7,825.65 8,695.65 Tax rate (%) 14.5% 28% 18% Respondent's realization (Rs.) 7,651.44 6,113.79 7,369.20 5. The Report also submitted that the Respondent had further clarified that the effective tax rate prior to GST in the VAT period was close to 18% and post 15.11.2017, the GST rate was 18% and he had maintained the original price of the product when migrating from VAT to GST, i.e. when tax rate was increased from 17.5 % to 28 %, hence there was no need for revision in the price when the tax rate had decreased from 28% to 18%, given that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017. Since the product was covered in the aforesaid notification, the Respondent was required to sell the above goods on the base prices which were being charged by him before 15.11.2017 and levy GST @18% so that the benefit of reduction in the rate of tax could be passed on to his customers. 9. The DGAP has also intimated that before enquiring into the allegation of profiteering, it was important to examine Section 171 of CGST Act, 2017 which governed the anti-profiteering provisions under GST. Section 171(1) CGST Act, 2017 reads as 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. Thus, the legal requirement was abundantly clear that in the event of a benefit of input tax credit or reduction in rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction can only be in absolute terms, such that the final price payable by a consumer must get reduced commensurate with the reduction in the tax rate. The DGAP had further stated that this was the legally prescribed mechanism for passing on the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the product. 13. The Respondent has filed his written submissions dated 05.02.2019 wherein he stated that the normal basic price of the product during the pre GST period was ₹ 7651.44 as was evident in the invoice dated 17.04.2017. He further submitted that the effective tax rate had remained the same i.e. at 18% both during the VAT regime and in December 2017 (GST regime) for the impugned product. He further added that on migration to GST from VAT, despite that the GST rate for the product had increased to 28% from the existing effective rate (at the time of migration) being around 18%, he continued to maintain the same Dealer price (inclusive of taxes) by giving an additional discount on the basic price which was a cost to him, resulting in loss on his existing sales. He further added that granting of additional discount was done in the anticipation that the government might soon reduce the GST rates post implementation of GST and also because the Respondent felt it might not be prudent to disturb the pricing (inclusive of Taxes) being charged from the dealers and chose to bear the burden of additional discount during the intervening period. The Respondent als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 = 2019 (1) TMI 21 - NATIONAL ANTI-PROFITEERING AUTHORITY , wherein the Authority vide Para 7 8 of the order, had appreciated that reduction in discounts offered did not amount to profiteering. 15. The Respondent further submitted that he had always been law abiding and had not engaged in profiteering and that the penal provisions prescribed under section 122, 123, 124, 125, 126 127 of the CGST Act, 2017 read with Rules 21 and Rule 133 of the CGST Rules 2017 would not be applicable in the present case, since there was no profiteering. He also submitted that even assuming that there had been profiteering, though not admitted, the basis adopted for computation of the profiteering element in the DGAP's Report was flawed resulting in computation of erroneous profiteering. He also stated that the DGAP's Report had adopted an average base price of ₹ 6,506/- for determining the profiteered amount and this average base price was arrived at only on the limited sales data from 1st November to 14th Nov. 2017. He has also claimed that such a base price was seriously flawed because in order to retain the dealer price (inclusive of taxes) under GST at the same lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, which is continued from the VAT regime), thereby retaining the same pricing inclusive of taxes on migrating to GST. (ii) Increase the price to give effect to the higher incidence of tax and reduce such increase separately as a discount from the basic price (basic price, which is continued from the VAT regime) thereby retaining the same price inclusive of taxes on migrating to GST. 17. He also submitted that in the option (a) above, the basic price under the GST regime appeared as a reduced figure over the basic price in the VAT regime, whereas under option (b), the basic price on migrating to GST would be identical to that under VAT regime, with the discount being shown separately. Thus, it could be seen that the basic price of the product as prevalent during the VAT regime had remained the basic price on migrating to GST and the discount offered by the Respondent on migrating to GST was netted off from the basic value of the product. He further added that if option (b) had been shown to show the discount separately, it would have become apparent that the basic price on migrating to GST was the same as during VAT regime. He further stated that the undisput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Discount (Rs.) 282.24 TTK Basic (Rs.) 7,369.20 TAX (Rs.) 1,109.46 2,142.40 1,377.26 1,326.46 DEALER PRICE (Rs.) 8,760.90 9,793.84 9,028.70 8,695.66 DEALER MARGIN @ 13% (Rs.) 1,309.10 1,463.00 1,349.12 1,299.34 CONSUMER PRICE (Rs.) 10,070.00 11,256.84 10,377.82 9,995.00 CONSUMER DISCOUNT (Rs.) 5,425.00 6,062.00 5,588.05 5,000.00 MRP (Rs.) 15,495.00 17,318.84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been ignored. 20. We have carefully considered the material placed before us and it has been revealed that the Central Govt. vide Notification No. 41/2017- Central Tax (Rate) dated 14.11.2017 had reduced the rate of GST from 28% to 18% in respect of the above product with effect from 15.11.2017, the benefit of which was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the CGST Act, 2017. The Respondent's submissions that the price of the product was not increased at the time of introduction of GST when the rate of tax was increased to 28% and hence the question of reducing the prices when the rate of tax was decreased from 28% to 18% does not arise is legally not sustainable in as much as Section 171 of the CGST Act, 2017 is very clear that the benefit of reduction in tax has to be necessarily passed on to the recipient by commensurately reducing the prices. Secondly the argument that the pre GST prices and the post reduction prices should have been compared will also not hold good as the DGAP has rightly taken into consideration the prices before the rate reduction and the prices after the reduction of tax rates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 376.00 188.00 4 06 Haryana 2,661.00 1 ,330.50 5 08 Rajasthan 12,147.00 6,073.50 6 09 Uttar Pradesh 2,446.00 1,223.00 7 10 Bihar 22, 138.00 11,069.00 8 14 Manipur 2,011.00 1,005.50 9 15 Mizoram 3,352.00 1,676.00 10 19 West Bengal 19,586.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to State Fund (Rs.) 4,87,539.00 22. The above amount shall be deposited within a period of 3 months by the Respondent, from the date of receipt of this order, failing which the same shall be recovered by the corresponding field formations of Central and State GST Authorities, as per the provisions of the CGST/SGST Act, 2017. The Authority as per the provisions of Rule 136 of the CGST Rules, 2017 also directs the respective Commissioners of CGST/SGST to monitor the implementation of this order. The Respondent is further directed to reduce the price of the product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, by making commensurate reduction in the prices, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent vide email dated 09.04.2019 had also confirmed that 50% of the profiteered amount has been deposited in the CWF, therefore, the balance amount be deposited by him in the respective CWFs of the States. 23. It is also established from the above facts that the Respondent had issued incorrect invoices while selling all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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