ESTABLISHMENT OF PROFITEERING ‘MUST’ FOR CONTRAVENTION OF SECTION 171 OF GST LAW
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
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
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2017
5%
345/-
–
5.
Impact Shirts 1500 H/S M.R.P. 689
211 dated 02/06/2017
2%
475/-
493 dated 14/08/2017
5%
475/-
–
6.
Impact Shirts 1500 F/S M.R.P. 699
211 dated
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. 01.07.2
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ST period) were relied upon:
S.No.
Description of the product supplied
Pre GST Invoice No. 140217101517 dated 15.06.2017
Post GST Invoice No. 14021702034 dated 22.07.2017
Base price
Total Tax
(Rs)
Total 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
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ing Committee on Anti-profiteering, Kerala and DGAP, New Delhi v. Peps Industries Pvt. Ltd., Trivandrum 2018 (12) TMI 1402 – NATIONAL ANTI-PROFITEERING AUTHORITY ;
(Date of Order 24.12.2018)
In this complaint, profiteering was alleged on 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 30.06.201
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era as compared to the pre-GST era, the provisions of Section 171 of the CGST Act, 2017 were not contravened and hence the allegation of profiteering by the supplier was not established.
While adjudicating the complaint, the NAA observed that the only issue that need to be dwelled upon in as to whether there 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 n
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