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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 ..... 90 Cm GHK 900CS Electric Chimney" (here-in referred to as the product) by not passing on the benefit of GST rate reduction from to w.e.f. 15.11.2017, vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017. Thus, it was alleged that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of CGST Act, 2017. In this regard, the Applicant No. 1 had relied on two invoices issued by the Respondent, one was dated 30.08.2017 (Pre-GST) and the second one was dated 18.12.2017 (Post-GST rate reduction w.e.f. 15.11.2017) as per the details furnished in the table given below:- Name of the product supplied Pre GST rate revision before 15.11.2017 Post GST rate 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 detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 7651.44 as has been shown in the table below: Particulars VAT period 10.08.2017 18.12.2017 MRP (Rs.) 15,495.00 15,495.00 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 effective tax rate during the VAT period was around 18% and the current GST rate was also 18%. The same is explained in the table given below:- Particular June, 2017 (VAT @14.5%) July, 2017 (GST @ 28%) 15.11.2017 (GST @ 18%) MRP(Rs.) 15,495.00 15,495.00 14,995.00 VAT(%) 14.50% 0 0 CVD(%) 3.00% 0 0 GST(%) 0 28% 18% Effective Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 benefit of input tax credit or reduction in rate of tax to the consumers under the GST regime. 10. The DGAP has also submitted that in terms of Section 171 of the CGST Act, 2017 and on perusal of the invoices it is clear that the Respondent had increased the base price of the product from Rs. 6113.79 to Rs. 7369.20/, when the rate of tax was reduced from 28% to 18% and on the basis of aforesaid pre and post-reduction GST rates and the details of outward taxable supplies (other than zero rated, nil rated and exempted supplies) of the product during the period 15.11.2017 to 31.08.2018, as furnished by the Respondent, the amount of net higher sale realization due to increase in the base price of the goods, despite the reduction in the GST rate from 28% to 18% the profiteered amount came to Rs. 9,75,078/-. The DGAP has further submitted that this profiteered amount had been arrived at by comparing the average basic price of the product (Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elt 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 also submitted that in the normal course of business sale promotion activities were under taken to increase sales by offering the product at special discounted price during the definite scheme periods and these special discounted prices were applicable for specific periods and were widely advertised before the special promotion scheme was launched. In the instant case, he had launched "Ponnona Mahotsavam" sales promotion scheme to commemorate the celebration of Onam festival, when the product was offered at a specially discounted basic price of Rs. 6113.79 with applicable GST. He also added that the period of the said sale Promotion scheme was from 10.08.2017 to 31.10.2017, after which the special discounted price was not available. The Respondent also submitted that the second invoice dated 18.12.2017, did not qualify for the special discounted price available under the special promotion scheme, since the sale was made after the expiry of the said scheme which ended on 31st Oct 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 level as that prior to GST period (VAT regime), he had given an additional discount over the basic price charged under the Pre GST regime (during VAT period). He further submitted that arriving at an average base price based on discounted basic price for the period 01.11.2017 to 14.11.2017 and comparing it with the actual sale data and arriving at alleged profiteering amount, was erroneous and was against all cannon's of law and principles of equity. 16. The Respondent has also filed additional written submissions on 14.02.2019 wherein he stated that the Anti-profiteering provision provided that the benefit of any reduction in the rate of GST should be passed on to the consumer and the seller was obligated to give the benefit to the consumer commensurate with the reduction in the rate of GST. He further stated that the 'reference point' was not stipulated in this provision but following principles of natural justice and equity the 'reference point' could not be arbitrarily determined to arrive at the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the same as during VAT regime. He further stated that the undisputed fact in both the cases was that a discount had been offered on the product to retain the price inclusive of taxes at the same level and merely because the referral basic price was not apparent from the invoice generated under GST in the form detailed at option (a) above (where discount was netted in the basic price itself and not shown separately), the referral basic price could not be determined arbitrarily. He also submitted that the referral basic price on migrating to GST could be established to be the basic price as prevalent in the VAT regime by the following method:- Particulars Under VAT(RS.) Under GST(RS.) BASIC PRICE 7651.44 7651.44 Higher Incidence of tax passed on as discount 806.99 Net Basic Price 7651.44 6844.45 Vat @ 14.5% 1109.46 GST @ 28% - 1916 45 Price to Dealer 8760.90 8760.90 MRP 15,495 15,495 He thus submitted that reference basic price to be considered in the impugned case should be the basic price under VAT and had he increased the MRP commensurate with the higher rate of tax and offered such increase as additional discount, the consumer would have p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-GST average basic price has been arrived at on the basis of the products sold during the period from 01.11.2017 to 14.11.2017. He further stated that the discounted prices during Onam festival had not been considered to arrive at the Pre-GST average basic price in the Report. He has also added that the average of pre-rate reduction prices had been taken as benchmark for comparison with the actual invoice prices post rate reduction and the transition from VAT to GST was not involved in the present case. The DGAP also submitted that in the case of M/S Asian Paints also, the discounted basic price in the pre-GST and post-GST periods had been considered in the DGAP's Report and the negligible difference of Rs. 4/- per unit had 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&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow under the overall supervision of DGAP: Sl. No State Code State Amount (Rs.) 50% of the amount (Rs.) 1 01 Jammu & Kashmir 5,042.00 2,521.00 2 03 Punjab 5,317.00 2,658.50 3 05 Uttarakhand 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 9,793.00 11 21 Orissa 17,159.00 8,579.50 12 22 Chhattisgarh 7,275.00 3,637.50 13 23 Madhya Pradesh 5,044 00 2,522.00 14 24 Gujarat 13,668.00 6,834.00 15 27 Maharashtra 49,272.00 24,636.00 16 29 Karnataka 78,446.00 39,223.00 17 30 Goa 10,573.00 5,286.50 18 32 Kerala 2,13,157.00 1,06,578.50 19 33 Tamil Nadu 2,54,979.00 1,27,489.50 20 34 Puducherry 24,172.00 12,086.00 21 36 Telangana 70,899.00 35,449.50 22 37 Andhra Pradesh 1,55,358.00 77,679.00 Total 9,75,078.00 4,87,539.00 50% - payable to Central Fund (Rs.) 4,87,539.00 50% payable to State Fund (Rs.) 4,87,539.00 22. The above amount shall be deposited within a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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