Patanjali held guilty of not passing on GST rate cut to consumers

Our Bureau New Delhi | Updated on March 17, 2020 Published on March 17, 2020

Anti-profiteering watchdog directs FMCG firm to deposit profiteered amount of ₹75 crore in welfare fund

Holding that Patanjali Ayurved had denied consumers the benefit of a reduction in GST rates, the National Anti-profiteering Authority (NAA) has asked the firm to deposit the profiteered amount of ₹75.08 crore in the Consumer Welfare Fund (CWF).

The FMCG firm allegedly did not pass on the benefit of a GST rate reduction that came into effect in November 2017, and also hiked the base price. Anti-profiteering provisions are applied if the benefit of a tax cut on any supply of goods or services, or the benefit of input tax credit, is not passed on to the recipient by way of a price cut. An application to invoke the provisions can be made by an interested party or a Commissioner or any other person.

Cash-back not the same

Patanjali argued that discounts were given through a cash-back scheme. However, the NAA insisted that the benefit of a tax rate cut should be passed on to consumers via a ‘commensurate reduction in the prices’.

Cash-back schemes are run by FMCG firms to promote sales, and are not related to tax cuts, it observed.

Patanjali claimed it had passed on the benefit of the rate reduction to its recipients by sending mails to its distributors, asking them to cut prices. However, the respondent did not refix the maximum retail price (MRP), said the NAA. As the manufacturer, the company is entirely responsible for fixing, rounding off and printing the MRP tags under the provisions of Rule 6 of the Legal Metrology (Packaged Commodities) Rules, 2011, it added.

Fixing MRPs

The NAA said Patanjali did not fix the new MRPs on the impacted SKUs (stock keeping units) and, instead, shifted the responsibility to its distributors and retailers, who continued to sell the products at the old rates. The respondent had violated the provisions of Section 171 (1) of the CGST Act, it said. Section 171 does not allow the respondent to suo moto decide on any other modality to pass on the benefit of a tax rate cut.

Therefore, any benefit of tax rate reduction passed on to a particular recipient or customer cannot be appropriated or adjusted against the benefit of tax rate reduction due to another recipient or customer, observed the NAA. Hence, ‘netting off' cannot be applied in the present case as the customers have to be considered as individual beneficiaries, and cannot be compared with dumped goods and netted off, it added.

Published on March 17, 2020

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