NON – PASSING OF ITC BENEFIT IS PROFITEERING UNDER GST
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 20-12-2018
In yet another complaint against M/s Theco India Pvt. Ltd. for contravention of section 171 of the CGST Act, 2017 on anti-profiteering measures, the National Anti-Profiteering Authority (NAA) vide its Order dated 28.11.2018 has ordered that the company had wrongly charged higher price without reducing the base price to the extent of Counter- Veiling Duty (CVD) @ 12.5 percent in pre-GST regime and ITC being allowed under GST regime on IGST paid on products. It also directed for imposition of penalty and directed further investigation by the DGAP to cover all products supplied by the company to unearth and quantify the benefit which it might have failed to pass on to the customers.
Brief Facts
In Crown Express Dental Lab, Ranchi & DGAP, Delhi v. Theco India Pvt. Ltd., Chennai 2018 (12) TMI 135 – NATIONAL ANTI-PROFITEERING AUTHORITY ; a comp
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ice (C=A+B)
59,06,000/-
Freight (D= 2% of 'C' above)
1,18,120/-
Price (including Freight = C+D)
60,24,120
Plus CST (2%)
Further, tax invoice dated 06.09.2015 (in GST regime) revealed as under:
Description
Price (in Rs.)
Lava Mill CNC 240 and accessories (A)
45,55,320/-
Lava Materials approved Sintering Furnace D664 (B)
14,68,800/-
Total price (C=A+B)
60,24,120/-
IGST (18%)
10,84,342/-
Price (including Tax)
71,08,462/-
Company Submissions
The company denied the allegations in complaint and submitted that:
* In GST regime, Custom Duty was reduced to 7.5% and its benefit was given to buyer.
* ITC can be claimed by buyer and it is wrong to claim that not price had increased.
* An additional discount was offered to offset any adverse GST impact, as such product was sold for the first time.
* It had imported goods under GST regime and had not claimed any transitional credit thereon.
* There had been an increase in taxable value of machine w.e.f. January
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have formed part of the cost of the above items.
However, import was made on 31.08.2018 in GST period when CVD and SAD were subsumed in IGST and entire amount of IGST @ 18% paid on import was eligible for Input Tax Credit (ITC). DGAP opined that company should have reduced the base price to the extent of the CVD that was no longer to be paid as well as to the extent of the IGST, the credit of which was available to it.
Thus, it was proved that the base price of the above items had remained the same, i.e., ₹ 60,24,120/- as per the quotation dated 28.11.2016 and the base price was not reduced to the extent of CVD that was not to be paid after the implementation of the GST.
Further, since the import had taken place post GST, company was not required to pay CVD and therefore taxable value should have been reduced commensurately. The amount of profiteering done by the supplier company was ₹ 478085.
NAA Findings
NAA observed that though company had argued for supply of add
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id in order to neutralise the impact of ITC which was available to the company. The NAA therefore, concluded that amount profiteered by the supplier for two machines was ₹ 4,78,085.
It profiteered at the expense of buyer and had violated provisions of section 171 of the CGST Act, 2017 and thus also rendered itself liable to penal action in line with the provisions of section 122 of the CGST Act, 2017 apart from its liability to refund the profiteered amount along with the applicable interest in terms of the provisions of the CGST Rules, 2017.
It is clear from the facts that the company was fully aware of the GST provisions and availability of ITC on account of IGST charged on import of goods. It was also fully aware of the provisions of section 171 of the CGST Act whereby it was bound to pass on the benefit arising due to ITC availability on import of the said product. However, it had deliberately acted in defiance of the above law and hence he is guilty of the conduct which is
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d quantify the benefit that the company has failed to pass on to his customers.
The outcome of NAA order is thus,
* Establishment of profiteering to the extent of ₹ 4,78,085 in terms of section 171 of the CGST Act, 2017
* Liable to be penalized in term of section 122 of the CGST Act, 2017
* Direction to reduce the sale price of the said items immediately, commensurate to the reduction in the price due to ITC of erstwhile chargeable CVD which is now available in the form of IGST and pass on this benefit to his customers.
* Direction to refund an amount of ₹ 4,78,085/- along with interest @ 18% to the complainant from the date when this amount was realised by it till the date of refund within a period of 3 months from the date of receipt of the order failing which the same shall be recovered by the DGAP as per the provisions of the CGST Act, 2017 and shall be refunded as has been directed in the order.
* For levy of penalty u/s 122 of the CGST Act, 2017, keeping in
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