No profiteering if reduction in base price is more than additional eligible ITC—NAA

Case of Smt. Mandalika Sakunthala Vs M/s Fabindia Overseas Pvt. Ltd. (National Anti-Profiteering Authority)

Date of Order—16.11.2018

Facts of the case— the applicants alleged that Respondent had not passed on the benefit of reduction in the rate of tax, when she had bought 'Bathing Bar' and 'Instant Drink Powder 50gms. It was also alleged by the Applicant that these products were being sold at the MRP of 95/- and 50/- respectively, which had 12.5% Excise Duty & 14.5% Value Added Tax (VAT), total 27% incidence of tax, built in the MRP till 30.06.2017 and after the implementation of the GST w.e.f. 01.07.2017, when the rate of tax was fixed as 18% on the above products they were still being sold at the above MRP by increasing their base prices. She had further alleged that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of CGST Act, 2017 and therefore, action should be taken against him.

Decision of National Anti-profiteering Authority— In this case actual pre-GST tax rate on the above products was not 27% (12.5% Excise Duty + 14.5% VAT), as had been mentioned by the Applicant No. 1 in her applications, but it was 14.5% (Nil Central Excise Duty+ 14.5% VAT) in the case of “Bathing Bar” and 16.5 % (2% Central Excise Duty + 14.5% VAT) in the case of “Instant Drink Powder 50 Gms.”

It is also revealed that the Respondent was procuring both the above products on interstate basis from their sole vendors and this tax liability had increased by 3.5% post GST from 14.5% to 18% w.e.f. 01.07.2017 and therefore, he had suffered loss on the supply of both the products in question. It is further revealed that the base price of these products had been reduced by the Respondent to maintain the same MRP (Pre GST MRP) inspite of the increase in the tax rate of both the above products. The anti-profiteering provisions contained in Section 171 (1) of the CGST Tax Act, 2017 are not attracted in the present case.

Since the reduction in the base prices of these products is more than the additional ITC eligible thereon, the allegation of profiteering is not established.