Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 26-2-2019 – While number of complaints being filed before National Anti-profiteering Authority (NAA) are on rise, still in the majority of cases, the case for contravention of section 171 of the GST law is not established as profiteering has to be established or substantiated , i.e., not passing of benefit of tax rate reduction and/ or input tax credit. The business entities need not worry about such complaints as the NAA shall adjudicate such cases only on the basis of documentary evidence and facts following principles of natural justice. Few of such complaints recently adjudicated go on to prove that the NAA does not proceed with the pre-determined mindset that each complaint received by it is a fit case of profiteering where section 171 has been contravened. Kerala State Screening Committee on Anti-profiteering & DGAP, New Delhi v. Impact Clothing Co, Bengaluru 2018 (12) TMI 1404 – NATIONAL ANTI-PROFITEERING AUT
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d 02/06/2017 2% 482/- 493 dated 14/08/2017 5% 482/ These shirts were exempted from Central Excise duty, vide Notification No. 30/2004-CE dated 09.07.2004 and attracted only Central Sales Tax (CST) @ 2%. After implementation of the GST w.e.f. 01.07.2017, the tax rate of these products was fixed 5%. The rate of tax on these shirts was actually increased from 2% in the pre-GST era to 5% in the post-GST era. Moreover, the pre-GST and post-GST base prices (excluding tax) had remained the same. Therefore, the provisions of Section 171 of the CGST Act, 2017 have not been contravened and the allegation of profiteering by the supplier was not established. The NAA noted that it is clear from the perusal of the facts of the case that there was no reduction in the rate of tax on the above products w.e.f. 01.07.2017 and hence the anti-profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 are not attracted. Also, there was no increase in the per unit base price (excluding tax) o
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al Price (Rs.) Base price (Rs.) GST (Rs.) Total Price (Rs) 1. Panasonic LED TH43E200DX#45 580 (HSN code 85281211) 27,428/- 7349/- (Rs. 2945/- Central Excise Duty @ 12.5% on 65% of abated MRP of ₹ 36250/as per Annexure-7) + ₹ 4404/- VAT on discounted price ₹ 30,373/-) 34,777/- 27818/- (after discount) 7789/(28% GST) 35,607/- Total Tax Pre-GST in (%) 26.79% Total Tax Post-GST in (%) 28% On scrutiny of invoices, DGAP observed that in the pre-GST era, the subject product attracted VAT @ 14.5% and Central Excise Duty @ 12.5% on 65% of abated MRP of the product, in terms of Notification No. 49/2008 Central Excise (N.T.) dated 24.12.2008. On implementation of the GST w.e.f. 01.07.2017, the GST rate on this product was fixed at 28%. It was reported by DGAP that there was an increase in the rate of tax on the said product from 26.79% in the pre-GST era (VAT and Excise Duty) to 28% in the post-GST era and there was no reduction in the rate of tax. Consequently, as there was no
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n the supply of Peps Spring Koil Bornell Normal Maroon 75x60x6 Mattress by not passing on the benefit of reduction in the rate of tax at the time of implementation of GST w.e.f 01.07.2017. Thus it was alleged that the supplier had indulged in profiteering in contravention of the provisions of Section 171 of CGST Act, 2017. The following invoices for pre-GST and post-GST were considered and relied upon: S.No. Description of the product supplied Pre GST rate Post GST rate Difference (in Rs.) Invoice No.& Date CST Rate Central Excise Duty Rate Price excluding Taxes (in Rs.) Invoice No. & Date GST rate Price excluding GST (in Rs.) 1. Peps Spring Koil Bornell Normal Maroon 75X60X6 Mattress (HSN 94042910) 2901 dated 30.06.2017 2% 12.5% 7,293 C/0014196 dated 09.08.2017 28% 7,986 693 C/002255 dated 15.06.2017 2% 12.5% 7,293 C/003495 dated 21.07.2017 28% 7,643 350 The DGAP observed that in the pre-GST era, the applicable Central Sales Tax (CST) on the product 'Peps Spring Koil Borne
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is a case of reduction in the rate of tax and whether the provision of section 171 of CGST Act, 2017 were attracted. It was held that it is clear from the perusal of the facts of the case that there was no reduction in the rate of tax on the above product w.e.f. 01-07-2017 and that the rate of tax on the said product has increased from 14.5% (2% CST + 12.5% Excise) to 28% and therefore, the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017. The complaint was accordingly dismissed. End Note In all the above complaints adjudicated by the NAA, it has been found that there was no prima facie case established and that the complaints should not have reached this stage involving crucial time of DGAP as well as the NAA, besides money spent on such adjudication. It would be desirable for the policy makers to appropriately amend the rules to ensure that: Only complaints with substantial or material evidence leading to anti-profiteering are forwarded to
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