McDonald\u2019s: Fast Food, Fast Profits (Part-1)
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 12-12-2018<\/p>\n
In over a dozen of complaints disposed off by the National Anti-profiteering Authority (NAA) so far, we have witnessed that of late, NAA has started confirming allegations against the business entities in relation to more than normal profiteering where tax related benefit was not passed to the customers.
\nIn yet another case, McDonalds' has fallen prey to NAA clutches for profiteering at the cost of customers and not passing the benefit of Input Tax Credit (ITC) and tax rate reduction or its products. The NAA vide its 42 page long order dated 16th November, 2018 came to the conclusion that M\/s Hardcastle Restaurants Pvt. Ltd. Mumbai, who were operating quick service restaurants under the brand of 'McDonalds' had indulged in profiteering, contravening the provisions of section 171 of the CGST Act, 2017. [ SHRI RAVI CHARAYA, SHRI CHANDRANATH SARKAR, SHR<\/p>\n
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Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ld have paid and hence it amounts to denial of benefit under Section 171 of the CGST Act. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n rate reduction in the prices. Also, the Central Government on the recommendations of the GST Council vide Notification No. 46\/2017-Central Tax (Rate) dated 14.11.2017 had reduced the rate of tax on restaurant services from 18% to 5% w.e.f. 15.11.2017 with the condition that the benefit of ITC would not be available on this service. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n he sale price of the products being sold by it would violate its right to carry on trade as per Article 19 (1) (g) of the Constitution and the provisions of Section 171 were not similar to the laws framed for controlling prices as per List III of Schedule-VII of the Constitution. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" McDonald\u2019s: Fast Food, Fast Profits (Part-1)By: – Dr. Sanjiv Agarwal Goods and Services Tax – GSTDated:- 12-12-2018 In over a dozen of complaints disposed off by the National Anti-profiteering Authority (NAA) so far, we have witnessed that of late, NAA has started confirming allegations against the business entities in relation to more than normal profiteering … Continue reading “McDonald\u2019s: Fast Food, Fast Profits (Part-1)”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-15472","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/15472","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15472"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/15472\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15472"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15472"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15472"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nBrief Facts
\nIn the instant case, there were two complaints lodged via e-mails alleging that though the rate of Goods and Services Tax (GST) on Restaurant services had been reduced from 18% to 5% w.e.f. 15.11.2017, the company had increased the prices of the products which were being sold by him and had maintained the same price which he was charging before the above reduction. It also claimed that the company had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against it. The entity against whom complaint was made is chain of restaurants run under the name of 'McDonalds' in western and southern parts and registered in ten states in India.
\nIt is a fact that based on GST Council's recommendations, the rate of GST on the Restaurant services was reduced to 5% w.e.f. 15.11.2017 with the condition that the I<\/p>\n
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\nIt was observed in the instant case that the company was selling over 1840 products out of which it increased the prices of over 1770 products (i.e. over 95% of the products), as revealed from pre and post 15th November, 2017 price list.
\nThough the GST was charged @ 5% any but it was on the increased price which customers were forced to pay. Infact, it should have charged the lower price after commensurate reduction due to reduction in the rate of tax and hence they were denied the benefit which had become due to them.
\nDGAP also computed the ITC claimed and found that ITC claimed was also in excess of the entitlement. DGAP observed that on the basis of th<\/p>\n
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\n * The cost of food and beverages had gone up due to the abrupt denial of ITC which had constrained it to increase the base prices to negate this impact and such increase was also not commensurate with the increase in the costs.
\n * The cost of the restaurant services had gone up by at least 15%.
\n * Prices of some premium products had been reduced from 11% to 22%.
\n * The restaurants in the shopping malls was charged on fixed or variable or semi-variable basis which was approximately 3.5% of the incremental turnover and was payable at the end of the year and since the bills for the same would be raised only at the year-end, it would not be eligible to claim ITC on such variable rent and it would suffer an es<\/p>\n
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