The National Anti-Profiteering Authority (NAA) has found Starbucks guilty of not passing on the GST rate cut benefits to the tune of Rs 7.49 crore to consumers.
The Applicant alleged that the respondent, Starbucks has profiteered to the tune of Rs 1.04 crore during the period from November 15, 2017, to June 30, 2018, which it is required to pass on to the buyers by commensurately fixing prices of products after taking into account the impact of denial of the input tax credit, which it has not done.
The respondent Tata Starbucks is a 50:50 joint venture between the Tatas and the global coffee chain, had hiked the base price of a specific coffee product after the GST Council cut tax rates on restaurant services from 18% to 5% with effect from November 15, 2017. This kept the retail sale price of the product (pre- and post-GST rate reduction) the same.
According to the complaint, the coffee chain had increased the price of its ‘short cappuccino’ from Rs. 155 to Rs. 170, when the GST rate reduction came into effect.
Starbucks argued that it was a part of a regular bi-annual price increase in October, but did so in November 2017 as it was upgrading its information technology system due to GST implementation.
It was contended that it followed a policy of revising prices twice a year by 7 to %, depending on the prices of the products, and adopted a practice of differential pricing, depending on the area of operation.
The Authority headed by the Chairman DR. B.N. Sharma noted that the respondent has committed profiteering by denying the rate reduction to the buyers of his product, which is in contravention of the provisions of Section 171 (1) of the CGST Act, 2017.
The NAA has ordered the coffee chain to deposit the profiteered amount in the consumer welfare fund of the Centre and states, along with 18% interest within 3 months.
However, NAA did not impose the penalty on the respondent for the reason that the provisions of Section 171 (3A) under which penalty has been prescribed for the above violation shows that it has been inserted in the CGST Act, 2017 with effect from January 1, 2020, vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from November 15, 2017 to June 30, 2018, when the Respondent had committed the violation.
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