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The National Anti-profiteering Authority (NAA), the watch dog for profiteering under Goods and Services Tax (GST) regime, has held a dealer of Patanjali Ayurveda guilty of not passing on the benefits of duty reduction. Accordingly, the dealer has been asked to deposit undue profit made with the consumer welfare fund.
The matter here is related with product named ‘Beauty Cream 50 GM’ manufactured by Patanjali Ayurveda. The GST rate on such products was lowered to 18 per cent from 28 per cent with effect from November 15, 2017. However, the allegation was that the Delhi-based dealer Satya Enterprises increased the base price of the product when the tax rate was lowered, so as to keep the MRP the same as it was prior to the rate reduction.
The respondent argued that that the MRPs (Maximum Retail Price) were fixed by the manufacturer which he was bound to charge and he could not reduce the same on his own. However, the NAA said that plea is not tenable as he was bound to reduce the MRPs of the products which were sold by him post November 15, 2017, keeping in view “the reduction in the rate of tax as he was a registered under the CG3T/SGST Acts and thus he was legally bound to faithfully implement the provisions of Section 171 of the above Act being the supplier of the goods.”
The dealer also argued that he had only charged commission at 5 per cent on the sales made by him which he was charging before and after coming in to force of the GST and hence he had not profiteered. However, the investigation revealed that he had increased the base prices of 109 products and forced his customers to pay more thus denying them the benefit of rate reduction.
Accordingly, the NAA asked the dealer to deposit ₹ 6.06 lakh along with interest at the rate of 18 per cent payable from the date when this amount was realised by him from his customers till the date of deposit in the Consumer Welfare Fund. The above amount shall be deposited within a period of 3 months by the Respondent from the date of receipt of this order.
According to Harpreet Singh, Partner at KPMG, with this ruling and some other recent rulings, it is quite evident that taking plea of having no control on MRP, as the same is affixed by manufacturer and hence cannot be changed, would not absolve the dealers of their legal obligation to pass on benefit to end customers.
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