Increase in quantity of goods, does not mean benefits of ITC is passed on due to GST Rate reduction: Delhi High court
In recent case of SHARMA TRADING COMPANY vs UNION OF INDIA & ORS., delhi High court held that, the ‘anti-profiteering mechanism’ is to safeguard consumers’ interests in the event of GST rate reduction and guarantee that businesses would transfer it to the final consumers. Merely increasing the quantity of product, does not mean that, said benefits is passed on to the consumers.
Background :-
The Petitioner is a partnership firm and a distributor of M/s Hindustan Unilever Limited. A complaint was filed against the Petitioner in respect of the product stating that the Petitioner continued to charge the same amount, despite the reduction in rate of GST. This complaint was considered by the NAPA, which was the competent authority at the relevant point of time to deal with such complaints. the Investigation Report was furnished by the Director General of Anti-Profiteering under Rule 129 (6) of the Rules, 2017 and held that the Petitioner had profiteered by not passing on the benefit availed by the reduction in GST rates to the consumers. So petitioner challenged Section 171 of the Central Goods and Service Tax Act, 2017 and the corresponding Rules ) on the ground of being unconstitutional, ultra vires of Article 14 and Article 19 of the Constitution of India.
Court Findings
it has been categorically observed that increase in volume or weight or supply of additional free material by any schemes would not be sufficient to satisfy the requirement of passing on the benefit availed to the consumers. However The purpose of reduction in GST is to make products and services more cost effective for the consumers. The said purpose would be defeated if the price is kept the same and some unknown quantity is increased in the product, even without the consumer requesting for the increased quantity product.
the rationale behind reduction in GST rates is to ensure that the consumer gets the benefit of the said reduction. A deadline, once fixed by way of notifications, cannot be sought to be violated merely on the ground that some special scheme is being launched or the product is being sought to be given free with some other product or the grammage or the quantity of the product is being increased.
The anti-profiteering measures enshrined in the GST law provide an institutional mechanism to ensure that the full benefits of input tax credits and reduced GST rates on supply of goods or services flow to the consumers. the purpose of the ‘anti-profiteering mechanism’ is to safeguard consumers’ interests and guarantee that businesses would transfer the benefits of lower tax rates and input tax credits to the final consumers.
Court Conclusion:
The Court upheld the order passed by National Anti- Profiteering Authority (NAPA) and directed to deposit the benefit to the Consumer Welfare Fund.
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