2018 (9) TMI 1763 – NATIONAL ANTI-PROFITEERING AUTHORITY – TMI – Profiteering – benefit of reduction in the rate of GST in restaurant service – purchase of 6 Hara Bhara Kabab Sub – base price of the product increased from ₹ 130/- to ₹ 145/- when the GST was reduced from 18% to 5% – Section 171 of CGST Act, 2017.
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Whether there was reduction in the rate of tax on the restaurant service after 14.11.2017 and whether the benefit as emanating from such reduced tax rate has not been passed to the Applicant No. 1 in terms of the commensurate reduction in the price of the product purchased by him?
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Whether profiteering of ₹ 452/- was made by the Respondent by selling 32 number of items on 14.11.2017 in Karelibaug outlet at increased base price?
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Held that:- It is apparent from the facts of the case that the Respondent had increased the base price of his products to make good the loss which had occurred due to denial of ITC post GST rate reduction. It is furthe
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e Applicant No. 1. Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs) for the Applicant No. 2. Sh. Smit P. Shah for the Respondent. ORDER 1. The present Report dated 1 1.05.2018 has been received from the Director General of Safeguards (DGSG) now Director General Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the case are that an application dated 01.01.2018 was filed by the Applicant No. 1 before the Standing Committee constituted under Rule 123 (1) of the above Rules alleging that the Respondent has not passed on the benefit of reduction in the rate of GST in restaurant service, when he had purchased 6 Hara Bhara Kabab Sub (here-in-after referred to as the product). It was also alleged that the Respondent had increased the base price of the product from ₹ 130/- to ₹ 145/- when the GST was reduced from 18% to 5%. Thus it was f
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the bills, audited balance sheet, GSTR-1 & GSTR-3b and sales register in support of his contention. 4. The DGAP has confirmed in his report that the rate of GST on the restaurant service had been reduced from 18% to 5% with the condition that ITC on the goods and services used in supplying the service will not be allowed vide Notification No. 46/2017-Central Tax (Rate) dated 14.1 1.2017 with effect from 15.11.2017. The DGAP has also stated that on scrutiny of the GSTR-1, GSTR-3b and the ITC Register submitted by the Respondent, it was observed that ITC amounting to ₹ 13,01,759/- was available to the Respondent during the period from July, 2017 to November, 2017 which came to approximately 1 1.80% of the taxable value of the service amounting to ₹ 1,10,29,612/- supplied during the same period but when the tax was reduced from 18% to 5%, the said ITC was not available to the Respondent. The DGAP has further stated that the analysis of the invoice-wise outward taxable supp
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o take place one day later w.e.f. 15.11.2017. The DGAP has also intimated that the increase in the base prices of the products sold by the Respondent on 14.11.2017 on account of denial of ITC was unjust as the ITC was available to him on 14.1 1.2017 since the GST rate was reduced from 18% to 5% and the ITC was denied on the restaurant service supplied by the Respondent only w.e.f. 15.11.2017. He has further intimated that the Respondent had increased the base price to include the cost of input tax and also subjected the customers to GST at the higher rate of 18%, therefore, the unwarranted increase in base price and not passing on the benefit of ITC to the consumers amounted to profiteering by the Respondent. He has also contended that while the increase in the base price of 12.14% was not exactly equivalent to the denial of ITC to the extent of 11.80%, such increase in the base price was commensurate with the denial of ITC. He has further contended that in anticipation of reduction in
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s taken from the franchisee expect the royalty on the net turnover. They also submitted that M/S Subway was not involved in fixing of the price of the products and it was solely the call of the franchisee to fix the prices of the products. They further submitted that no ITC was being passed on by M/s. Subway as the franchisee was free to buy the raw material from the local sources. They also stated that only the ingredients and the products to be served were decided by M/s. Subway. 6. The DGAP was also asked to file reply on the ITC aspect of the pre and post GST, embedded tax aspect of the pre GST era of which credit was not allowed and to extend the investigation to other outlets and products of M/S Subway vide letter dated 11.06.2018. The DGAP vide his reply dated 26 June 2018 has stated that the application was filed in relation to the restaurant service supplied on 4.12.2017 and the GST rate on restaurant service had been reduced from 18% (with ITC) to 5% (without ITC) w.e.f. 15.1
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also considered the material placed before us and following two points pertaining to the allegation of profiteering made against the Respondent need to be decided as per the provisions of Sec. 171 of the CGST Ac, 2017:- i. Whether there was reduction in the rate of tax on the restaurant service after 14.11.2017 and whether the benefit as emanating from such reduced tax rate has not been passed to the Applicant No. 1 in terms of the commensurate reduction in the price of the product purchased by him? ii. Whether profiteering of ₹ 452/- was made by the Respondent by selling 32 number of items on 14.11.2017 in Karelibaug outlet at increased base price? 9. It is apparent from the record that the GST on restaurant service has been reduced by the Central Government vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 from 18% to 5% and ITC has been disallowed. It is also revealed that the Applicant No. 1 in his application dated 01.01.2018 had stated that he had purchased
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