2018 (10) TMI 1338 – NATIONAL ANTI-PROFITEERING AUTHORITY – 2018 (17) G. S. T. L. 627 (N. A. P. A.) – Profiteering – restaurant service – failure to pass the benefit of reduced rate of GST – it was alleged that Respondent has not passed on the benefit of reduction in the rate of GST in restaurant service, when he had purchased “Hara Bhara Kabab Sub” – 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%.
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Benefit of rate reduction – 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 further revealed that the Respondent had increased the average base price by 12.14% to neutralize the denial of ITC of 11.80% and such increase is commensurate with the increase in the cost of the product on account of denial of ITC. Ther
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eral 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 further alleged that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of CGST Act, 2017. 2. The above application was examined by the Standing Committee on AntiProfiteering and was referred to the DGAP vid
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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-I, 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 supplies for the period w.e.f. 15.1 1.2017 to 28.02.2018 revealed that the Respondent had increased the base prices ranging from 6% to 17% of the different items supplied as a part of restaurant service to make good the loss of ITC post GST rate reducti
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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 the rate of GST and denial of ITC w.e.f. 15.11.2017 the Respondent had increased the base price of certain products and collected excess amount of ₹ 452/- on 14.11.2017 as a result of which consumers had to pay higher amount in the form of in
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r 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 1 1.06.2018. 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. 15.11.2017 and therefore the investigation could not be extended to the period before 15.1 1.2017 and the ITC involvement in the pre GST valuation had not been considered relevant. The DGAP has further stated that there were approx. 600 outlet of M/S Subwa
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n 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 Hara Bhara Kabab from the Respondent who had increased the base price of the product from ₹ 130/- to ₹ 145/- and had denied the benefit of rate reduction to him. He had also submitted copy of the tax invoice dated 04.12.2017 and the leaflet
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