DGAP Vs Urban Essence (Subway Franchisee) (GSTAT)
GSTAT Upholds Anti-Profiteering Ruling Against Subway Franchisee for Failure to Pass on GST Rate Reduction
In a significant ruling, the Principal Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) has confirmed that M/s Urban Essence, a franchisee of Subway, engaged in profiteering by not reducing its product prices commensurately with a reduction in the GST rate. The tribunal found that the company had a profiteering amount of ₹5,47,005 that must be deposited. The case, DGAP vs. Urban Essence, centered on two primary questions: whether the company profiteered by not passing on the GST rate reduction on restaurant services and whether it should have been granted credit for invoices that were allowed to be claimed later. The GSTAT’s decision upholds the findings of the Directorate General of Anti-Profiteering (DGAP) after a long and detailed investigation.
The investigation began after a complaint was forwarded to the Standing Committee on Anti-Profiteering, which then referred the matter to the DGAP on October 9, 2019. The allegation was that M/s Urban Essence had not passed on the benefit of the GST rate reduction on restaurant services from 18% to 5%, which took effect on November 15, 2017, through notification No. 46/2017 . This notification also had a crucial condition: Input Tax Credit (ITC) on goods and services used for the restaurant service would no longer be available. The DGAP’s investigation covered the period from November 15, 2017, to October 31, 2019.
