Determining profiteering for the first time in its five orders so far under the goods and services tax (GST) regime, the National Anti-profiteering Authority (NAA) has ruled against Sharma Trading Company, a stockist and distributor of Hindustan Unilever Ltd (HUL). The NAA in its September 7 dated order has found the trader, Sharma Trading, to have profiteered amount of Rs 5,50,370 on sale of 35,244 units of Vaseline VTM 400 ml by not passing on the benefits of reduction in GST rate from 28 per cent to 18 per cent to the consumer.
The case was among the first five cases for which Director General Anti-profiteering (DGAP) had sent notices for investigation in December last year. The case pertains to complaint filed by Pawan Sharma of Jaipur-based Kalptaru Departmental Store against Sharma Trading company for not passing on the benefit of cut in GST rate effective November 15.
Sharma Trading in his defence has said that the excess input tax credit has been recovered by HUL from him. Also, he said that since he is an intermediary, so he had not profited due to the GST reduction.
The NAA has also ordered Sharma Trading to pay penalty under Section 122 of CGST Act, which states that supplier of any goods or services without issue of invoice or false invoice is subject to pay penalty of Rs 10,000 or an amount equivalent to the tax evaded or the tax not reduced under Section 31 or deducted but not paid to the government, whichever is higher.
However, before the imposition of the penalty, it has given notice to Sharma Trading to respond why it should not be imposed. Sharma Trading has said that HUL had changed the base price in its software and so he was bound to charge the increased base price. He also said that after one month of the purchase by the complainant, he had returned all purchased units and hence, no profiteering could be alleged against him. The NAA said the per unit profiteering amount is Rs 184 and shall be returned by Sharma Trading with interest rate of 18 per cent.
For other recipients which are not identifiable, the amount of profiteering has been determined as Rs 5,50,186 excluding Rs 184. The NAA said the DGAP shall ensure that in case the profiteered amount has been deposited by HUL in the Consumer Welfare Fund, then the balance amount due as interest be calculated and deposited by Sharma Trading.
Under GST, a three-tier structure is there to look into anti-profiteering complaints: state-level screening committees for complaints of local nature or a national-level standing committee for profiteering at all-India level. If the respective committees find merit in the complaints on examination, they refer the cases for further investigation to the DGAP, which has to furnish a report within three months or an extended period of 6 months to the NAA.