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Withdrawal of discounts was the prerogative of the supplier and did amount to profiteering

Anti-Profiteering — The brief facts of the present case are that a reference was received from the Standing Committee on Anti Profiteering on 27.03.2019 by the DGAP with a recommendation to conduct a detailed investigation in respect of an application filed by the Applicant No. 1, originally examined by the Maharashtra State Screening Committee on Anti-profiteering under Rule 128 of the CGST Rules 2017. The Applicant No. 1 has alleged profiteering, in respect of restaurant service supplied by the Respondent (Franchisee of M/s Subway Systems India Pvt. Ltd.). It was alleged that despite the reduction in the rate of GST from 18% to 5% w.e.f. 15.11.2017, the Respondent had increased the base prices of his products and had not passed on the commensurate benefit of reduction in the GST rate from 18% to 5% w.e.f. 15.11.2017, effected vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017. Held that— It is clear from the plain reading of Section 171(1) mentioned above that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second about the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been a reduction in the rate of tax from 18% to 5% w.e.f. 15.11.2017, vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 in the post GST period. It has been revealed from the DGAP's Report that the ITC which was available to the Respondent during the period July 2017 to October 2017 is 7.39% of the net taxable turnover of restaurant services supplied during the same period. With effect from 15.11.2017, when the GST rate on restaurant service was reduced from 18% to 5%, the ITC was not available to the Respondent. The DGAP in his Report has stated that the Respondent had increased the base prices of different items by more than 7.39% i.e. by more than what was required to offset the impact of denial of ITC, supplied as a part of restaurant services to make up for the denial of ITC post-GST rate reduction and on comparison of pre and post GST rate reduction prices of the items sold in respect of items sold. Accordingly, the quantum of profiteering has been computed to Rs. 7,33,043/- as per Annexure-10 of the DGAP's Report dated 13.09.2019, which is correct and can be relied upon. — State Tax Officer, Director General of Anti-Profiteering, Central Board of Indirect Taxes & Customs Vs. Bonne Sante [2020] 22 TAXLOK.COM 092 (NAPA)