Notices have been served to Hardcastle Restaurants Pvt Ltd, the master franchisee of fast-food chain McDonald’s in western and southern India, Lifestyle International and Sharma Trading Ltd, a Jaipur-based dealer of Hindustan Unilever’s Vaseline, in relation to anti-profiteering complaints filed by consumers under the new Goods and Services Tax (GST) regime. Directorate General of Safeguards, the Finance Ministry’s arm for safeguard investigations related to indirect taxes, has served the notices, which were sent out on Friday.
The notices have been served “to collect information/documents and evidence to investigate and determine whether the benefit of reduction in GST rate or the benefit of input tax credit (ITC) has been passed on to the customers by commensurate reduction in prices”. The companies have been asked to provide copies of balance sheets, profit and loss account statements for 2016-17, GST returns for July-December, details of invoice-wise outward taxable supplies, two sample invoices for sale and purchase of goods each and price list before and after November 15. They have been asked to respond by January 12, 2018 stating whether they admit that they have not passed on the benefit of tax reduction or ITC benefit to the consumers by way of “commensurate reduction” in prices.
The notice sent to Hardcastle Restaurants states that the proceedings have been initiated for supply of restaurant service in case of serving ‘McCafe Regular Latte’ from the McDonald’s outlet in Mumbai’s Goregaon East on November 15 for a price of Rs 142 including 5 per cent GST, the same price as was charged before November 15 when the GST rate on restaurant service was 18 per cent. “Applicants have contended that M/s Hardcastle Restaurants Pvt Ltd have not passed on the benefit of reduction in rate of tax to the customers since the concerned outlet had charged the same price (Rs 142) on 07.11.2017 when the GST rate was 18 per cent,” the notice stated. As per the other notice, the complainant stated she purchased Maybelline FIT Me Foundation from Lifestyle International at Ghaziabad’s Mahagun Mall on November 22 for Rs 525 including 18 per cent GST. The complainant has contended that Lifestyle International did not reduce the price even though the GST rate on the foundation was reduced from 28 per cent to 18 per cent with effect from November 15, the notice said.
In the third case, the complainant has stated that M/s Sharma Trading Company did not pass on the benefit of GST reduction when he bought Vaseline VTM 400 ml for Rs 213.60 on November 15, even though the GST rate on this product was reduced from 28 per cent to 18 per cent.
The notices also state that if the companies fail to respond within the stipulated time period, then the case is liable to be decided ex-parte on the basis of available evidences/documents on the record. On December 15, DG Safeguards had served notices to Haryana-based real estate company, Pyramid Infratech Pvt Ltd, and a Bareilly-based Honda’s authorised car dealer for complaints against profiteering under the new indirect tax regime. 36 people had filed the anti-profiteering complaint against Pyramid Infratech, stating that the builder was asking for 12 per cent GST over and above the basic cost of the flat despite availment of ITC benefit, the notice served to the company stated. The complainant against the Bareilly-based Honda’s dealer, Vrandavaneshwaree Automotive Pvt Ltd, has alleged that he was charged GST on the pre-GST determined price of Rs 9.13 lakh, while it should have been levied at the reduced price at the time of July 11 delivery of Rs 8.98 lakh. Both the companies in these cases have been asked by DG Safeguards to respond by January 1, 2018, the notices said.
So far, 169 anti-profiteering complaints have been registered under the GST regime, Minister of State for Finance Shiv Pratap Shukla had said in his reply to a question in Lok Sabha on Friday. Under the GST regime, a three-tier structure has been formed to look into anti-profiteering complaints wherein affected consumers can file complaints with the state-level screening committees if the profiteering is of local nature or a national-level standing committee if the profiteering is of all-India character. If the respective committees find merit in the complaints on examination, they would refer the cases for further investigation to the Directorate General of Safeguards, which has to furnish a report within three months or an extended period of 6 months to the B N Sharma-headed National Anti-Profiteering Authority.
The national anti-profiteering authority, which has been set up for a two-year period, has been empowered to order reduction in prices, return of the amount not passed on to the consumers with an interest rate of 18 per cent to the recipient, imposition of penalty and cancellation of registration of the supplier. In case the eligible person does not claim return of the amount or is not identifiable, then the amount of undue benefit shall be deposited in the Consumer Welfare Fund as provided under Section 57 of the Central GST (CGST) and State GST (SGST) Acts.
Section 171 of the CGST Act, which pertains to anti-profiteering, provides that any reduction in the rate of tax on supply of goods or services, or the benefit of input tax credit, shall be passed on to the recipient (consumer) by way of a commensurate reduction in prices. The government has been asking companies to ensure reduction in prices for consumers, especially after the GST Council last month announced a cut in rates of over 200 items, as well as a cut in the GST rate for all restaurants, barring those in starred hotels, to 5 per cent. The GST Council had cut GST rates mostly for consumer items of daily use, leaving only 50 items in the highest slab of 28 per cent. The new GST rates came into effect from November 15.
After the GST rate cut on over 200 items last month, many consumer goods firms had instructed their trade channels to immediately cut prices for stock in trade. Last month, Finance Secretary Hasmukh Adhia had said that the companies have to ensure an immediate cut in prices across the retail chain to avoid facing anti-profiteering action by the government, pinning the responsibility on consumer goods companies for reduction in prices following the recent cut in GST rates. The government had also instructed the consumer goods companies to carry new price tags on existing stocks showing the reduced retail prices after the cut in GST rates.