The National Anti-Profiteering Authority (NAA) in an order highlighting the complexities involved in enforcing the anti-profiteering provisions in the Goods and Services Tax (GST) law, the National Anti-profiteering Authority (NAA) has ordered a probe into the ‘profiteering’ aspect of goods sold by Phillips India Ltd.
The Applicant, DGAP in the present case to the Standing Committee on Anti-profiteering, alleging profiteering by the Respondent, Phillips India on the supply of “Food Processor” by not passing on the benefit of GST at the time of implementation of the GST. It was also alleged that the Respondent had indulged in profiteering in contravention of the provisions of Section 171 of the CGST Act, 2017. In this regard, the Applicant Authority relied on two invoices issued by the Respondent.
The order highlights the divergent interpretations about anti-profiteering provisions that the authorities and many companies hold. Given the difficulties in ensuring that prices are cut at the level of each business unit handling individual products in a long supply chain, businesses tend to only ensure that they pass on benefits of tax rate reduction to consumers as a whole and that they do not profiteer at the corporate level. However, the authorities want to ensure that each individual consumer benefits from the tax rate cut and does not set off any discount given to one customer against another customer not getting the benefit of the tax rate cut.
The issues raised in this case were whether there was a reduction in the rate of tax on the product; whether any benefit of reduction in the rate of tax was to be passed on; and whether the benefit of reduction in tax was passed on to the recipient by way of commensurate reduction in prices.
The Authority consisting of Technical Member J.C. Chauhan and Amand Shah ordered DGAP to investigate all other impacted products supplied by the company and submit a report. An email sent to Phillips India on Wednesday seeking comments remained unanswered at the time of publishing.
The NAA order said that Phillips India has informed that although the base price of the product has increased, it has given higher discounts to the recipient, QRS Retail after GST rollout. This argument, however, did not convince the DGAP about not profiteering on the transaction. The company has been asked to deposit INR 4.5 lakh to designated consumer welfare funds and to explain why a penalty should not be imposed.
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