Jubilant FoodWorks, the franchisee owner of Domino’s Pizza in India, has been found guilty of not passing on tax benefit of Rs 41.42 crore on the sale of its products ‘Dominos Stuffed Garlic Bread’ and ‘Medium Veg Pizza’ under the goods and services tax (GST) regime. The company has been directed to deposit the profiteered amount, divided equally between the states and Centre, the National Anti-Profiteering Authority (NAA) said in an order.
The order was passed based on an e-mail complaint filed by a customer that Jubilant FoodWorks had not reduced the prices of ‘Dominos Stuffed Garlic Bread’ and ‘Medium Veg Pizza’ despite a cut in GST rate from 18 per cent to 5 per cent. GST rate on restaurants was cut to 5 per cent without input tax credit (ITC) from 18 per cent (with ITC) with effect from November 15, 2017.
The NAA in its order said that Jubilant FoodWorks has not passed on the benefit of reduction in the rate of tax to its customers during the period November 15, 2017 to May 31, 2018. It found that quantum of denial of rate cut benefit or profiteered amount illegally earned by Jubilant FoodWorks is over Rs 41.42 crore and asked the company to reduce prices of its products by way of commensurate reduction in taxes.
“The Respondent (Jubilant FoodWorks) is directed to refund to the applicant an amount of Rs 5.65 along with interest @18 per cent from the date of charging the above amount from him till its refund … he is further directed to deposit the balance amount of Rs 41,42,97,629.25 in the ratio of 50:50 in the Central and the State Consumer Welfare Funds along with interest @18 per cent till the same is deposited, within a period of 3 months,” the NAA said.
The NAA also asked the Directorate General of Anti-Profiteering (DGAP), which investigated the case, to conduct further investigation post May 31, 2018, to check if the benefit of tax reduction was passed to customers. “It is clear that the Respondent has resorted to profiteering by charging more price than what he could have charged by issuing wrong tax invoices. He has further acted in conscious disregard of the obligation which was cast upon him by the law, by issuing incorrect invoices in which the base prices were deliberately enhanced more than what he was entitled to increase due to denial of ITC and thus he had denied the benefit of reduction in the rate of tax…,” the NAA said.
The authority has also issued a show cause notice to Jubilant FoodWorks to explain why penalty should not be imposed on the company.