Dr. Sanjiv Agarwal, FCA, FCS

 Dr. Sanjiv Agarwal

The complaint against profiteering came up recently before the National Anti-profiteering Authority (NAA) in a case involving supply of tiles. In Kerala State Screening Committee on Anti-profiteering & DGAP, CBIC New Delhi v. Asian Grantio India Ltd., Ahmedabad, the NAA vide its Order dated 24.12.2018 ordered that where the business entity  has duly passed on the benefit of reduction in the tax rate by keeping the base price constant thus reducing the selling price of the products in question, the anti-profiteering provisions contained in Section 171 (1) of the CGST Tax Act, 2017 are not attracted.

In the instant case, it was alleged that while GST rate was reduced from 28% to 18% w.e.f. 15.11.2017 vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017 on specified product of  tiles (Granure Hard Nero and Granure Hard Crema – 10 mm tiles based on invoices issued prior to and post 15.11.2017, the supplier of goods has not reduced the selling price.

DGAP enquiry observed that two sample invoices dated 30.08.2017 (pre-GST rate reduction) and 23.11.2017 (post-GST rate reduction) revealed the following:

Pre-revision (before 15.11.2017) Post-revision (after 15.11.2017) Difference in Price (in Rs.)
Invoice No./Date Tax Rate Price per Box (in Rs.) Invoice No./Date Tax Rate Price per Box (in Rs.)  
1101171B/G01063 dated 30.08.2017 28% 743.95 110/1716/G02733 dated 28.11.2017 18% 743.95
1110/1716/G01063 dated 28.11.2017 28% 650.93 1110/1716/G02733 dated 28.11.2017 18% 650.92 -0.01

The DGAP observed that the business entity had not increased the per unit base price (excluding GST) of both the products after GST rate reduction w.e.f. 15. 11.2017, which were Rs. 743.95 and Rs. 650.93 in both the periods. Thus, though the GST rate was reduced from 28% to 18% w.e.f. 15.11.2017, the absence of any upward change in the per unit base price (excluding GST) confirmed that the allegation of profiteering by the was not sustainable.

The NAA took up the matter to examine whether there was any reduction in the GST rate and whether the benefit of reduction in the rate of tax was passed on or not to the recipient as provided under Section 171 of the CGST Act. From the invoices, it was evident that the base prices of both the products had remained same. It was also observed that sale price of these products was reduced when the GST rate on the above items was revised from 28% to 18%. Thus, it was clear that the base prices have not changed and accordingly the selling prices of the products had been reduced.

In conclusion, the NAA concluded that the business entity (respondent) had not contravened the provisions of Section 171 of the CGST Act, 2017 and hence there was no merit in the application filed by the complainant and the same was dismissed.

Thus, where reduction in selling price is effected commensurate with the reduction in GST rates, these can not be any sustainable ground for confirming the contravention of provisions of section 171 of  CGST Act, 2017 for profiteering.

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February 2021