Reduction in discount doesn’t amount to profiteering

In re Kerala State Screening Committee on Anti-profiteering Vs M/s Asian Paints Ltd. (National Anti-Profiteering Authority)

We have carefully considered the DGAP’s Report and the documents placed on record 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, 2017.

From the invoices referred above, it is evident that the Respondent has increased the base price of the product from Rs. 1855.05/- to Rs. 1859.55/- resulting in an increase of Rs. 4.50/-. In this context, it is apparent that the post-GST price before discount has been reduced from Rs. 2159/- to Rs. 1927/-. Also, the discount offered has been reduced from Rs. 75.57/- to Rs. 67.45/- i.e. by Rs. 8.12/- and hence post-GST, there is increase in the base price of Rs. 4.501-. The increase in the base price is on account of the reduction in the discount. It is also revealed that the reduction in discount doesn’t amount to profiteering as the same was offered from his profit margin by the Respondent and doesn’t not form part of the base price and therefore, the Respondent cannot be held guilty under Section 171 of the Act.

FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY

1. The present Report dated 28.09.2018, has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the case are that the Kerala State Screening Committee on Anti-Profiteering, vide the minutes of it’s meeting held on 08.05.2018 had referred the present case to the Standing Committee on Anti-profiteering, alleging profiteering by the Respondent on the supply of the product “Paint (AP Apex Classic WT 10 LT (HSN Code 3209))”, by not passing on the benefit of reduction in the rate of tax of GST at the time of implementation of the GST w.e.f. 01.07.2017. In this regard, the Kerala State Screening Committee had relied on two invoices issued by the Respondent, one dated 20.06.2017 (Pre-GST rate reduction) and the other dated 09.11.2017 (Post-GST rate reduction).

2. The above application was examined by the Standing Committee on Anti-Profiteering and was further referred to the DGAP vide minutes of it’s meeting dated 02.07.2018 for detailed investigations under Rule 129 (1) of the CGST Rules, 2017.

3. The DGAP has stated in his Report dated 28.09.2018 that in the pre GST era, the product “Paint (AP Apex Classic WT 10 LT (HSN Code 3209))” attracted VAT © 14.50% and the Central Excise Duty @ 12.50% on 70% of the MRP, in terms of Notification No. 49/2008-CE (N.T.), dated 24.12.2008. On implementation of the GST w.e.f. 01.07.2017, the pre-GST rate and the post-GST sale invoice-wise details of the applicable rate of tax and the base price (excluding Central Excise Duty, VAT or GST) of the said product supplied by the Respondent are furnished in the table below:-

Table