Kerala State Screening Committee on Anti Profiteering Vs Whirlpool of India Ltd. (NAA)
NAA determines amount profiteered by Whirlpool at Rs. 4,07,451/- and directed Whirlpool to reduce the price of Refrigerator Whirlpool (HSN code 84182100) as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of to so that the benefit of tax reduction is passed on to the recipient and also deposit the profiteered amount along with interest @ 18%. A show cause notice be issued to him to explain why the penalty under GST Act should not be imposed on him.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The brief facts of the case are that the Applicant No.1, vide minutes of its meeting held on 08.06.2018 had referred a case to the Standing Committee on Anti-profiteering against the Respondent alleging profiteering or the supply of “Refrigerator Whirlpook FP313D PROTTON ROY MIRROR” HSN code 84182100) (hereinafter referred to as the product) by not passing on the benefit of reduction in the rate of tax w.e.t. 01.07 2017, by way of commensurate reduction in price: in terms of Section 171 of the Central Goods and Services Tax (CGST) Act, 2017. In this regard, the Applicant Na 1 had relied on two invoices issued by the Respondent, the details of which are furnished in the Table given below:-
2. The above complaint was examined by the Standing Committee on Anti-profiteering in its meeting held on 02.07.2018, wherein it was decided to refer the matter to the Director General of Anti-profiteering (DGAP) to initiate detailed investigation in the matter under Rule 129 (1) of the CGST Rules, 2017.
3. On receipt of the reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129 (3) of the CGST Rules, 2017 was issued to the Respondent by the DGAP on 10.09.2018 asking him to reply whether he admitted that the benefit of reduction in the GST rate had not been passed on to the recipients by way of commensurate reduction in price. The Respondent was also asked to Suo Moto determine the quantum of benefit not passed on and indicate the same in his reply to the Notice along with the supporting evidence.
4. The period covered by the current investigation is from 01.07.2017 to 31.08.2018. The time limit to complete the investigation was extended upto 09.12.2018 by this Authority, in terms of Rule 129 (6) of the above Rules vide order dated 09.10,2018.
5. The Respondent had submitted his replies to the Notice vide his letters dated 01.10.2018, 09 10.2018, 12.10,2018, 15.10 2018, 16,10.2018, 05.11 2018, 12,11 2018. 16.11.2018, 29.11.2018, 01.12.2018 and 03.12.2018 stating –
(a) That as a practice, he was operating on an All India constant Price List i.e. same Maximum Retail Price (MRP) and Dealer Price (DP) across all States, The DP was defined as the total Basic Price plus Value Added Tax (VATy Goods & Services Tax (GST). In the pre-GST period, the VAT rates used to vary from State to State. Since the DP was constant on All India basis, the Basic Price also varied from State to State. However, in the post GST period, since the GST rate was constant. the Basic Price was also constant across the States. The Respondent had also used the term Net Basic Price’ (NIBP) which was the Basic Price less Excise Duty in the pre @ST period and it was the sane as the Basic Price in the post GST period. The Respondent had used the term ‘Sales Realization’ to reflect Net basic Price less Discount.
(b) The DP effective on 11.092016 (pre-GST) for the impugned product was Rs. 37.3001- per unit and on 03.08.2017 (post- ST), it was Rs. 38,175 per unit. The increase in DP of Rs. 8751- per unit in the two invoices was due to:-
(i) increase in Material Cost: Impact of Rs 365 per unit (on comparing effective Bill of Manufacture (BOM) cost as per the Systems Applications and Products (SAP) software).
(ii) Increase in Freight Cost: Impact of Rs. 29 per unit (on account of various market factors like availability driven by demand supply gaps, loading regulations and overall inflation etc.).
(iii) Reduction in Sales Realization due to GST Impact of Rs 441 per unit.
The Respondent has furnished comparison of the impact on the profit & loss due to transition to GST on the impugned product i.e. ‘Refrigerator FP313D PROTTON ROY MIRROR’, considering the pre-GST figures as mentioned in the Notice and by working out the post-GST Basic Price treating the DP as constant (same as pre-GST), as per the details furnished in Table- ‘B’ below:-
Table-‘B’
(Amount in Rs.)
The Respondent has claimed that it could be seen from the Table-B above that if the All India pre-GST Net Basic Price (Rs. 29,5820 was compared with the All India post-GST Net Basic Price (Rs. 29,1404 there was reduction of Rs. 441 per unit (-1.5%) which directly impacted his margins.
(C) That to bridge this gap and to maintain margins. there was a need to increase the price of the impugned product however, in the case of the impugned product, there had been no price increase between October, 2015 and August, 2017 when the DP was increased.
That in the Table-1A’ mentioned supra, there was gap in the discount offered on the Invoices in the Pre and Post GST columns (Rs. 3860/- in pre-GST and Rs. 3349/- in post-GST), The mechanism of passing on discounts in the industry depended on various market factors like sales momentum, festival timings, trade partner tie ups, volume discounts. share of on invoice and off invoice discounts etc. Therefore, for any comparison of the pre-GST and post-GST prices, the Respondent had equated the per unit discount value. as has been furnished in Table-‘C’ below–
Table-‘C’
(Amount in Rs.)
The Respondent has also stated that it could be seen from Table- C above that the real comparison of the impact of GST could be gauged by the amounts in Column B (12’re-GST All India) vis-a-vis the amounts mentioned in Column D (Post-GST with Constant Discount). Sales Realization in Columns Rs. 25,7221- and in Column D. it was Rs. 25.9641-. It could be Conciuded that with a OP increase of Rs_ 875/- per unit (Rs. 38.175- R5 37,3G0), the impact in Sales Realization was only Rs. 2421- (Rs. 25.964- Rs 25,722)_ However, the total impa.ct on rnargms has been furnished in Table-‘D’ below:-
Table ‘D’
December, 2017. The summary has been furnished in Table-‘E’ given below –
Table-‘E’
(Amount in Rs.)
The Respondent has also contended that as could be seen from the Tabre-E above. the actual discount passed on to the trade partner has actually increased by Rs. 1051- per unit over the period.
That the allegation made in the Notice that the benefit of reduction in the rate of tax has not been passed by commensurate reduction’ of price was not correct as there was no reduction in the total tax incidence On %) and iniart the lotai tax incidence as % of Met Basic Price has gone up from 26.1% to 28.0% as has been shown in the Table-‘F’ below:-
Table ‘F’
(Amount in Rs.)
