Subway Franchisee guilty of denying GST Rate cut benefits to Customers: NAA [Read Order]

Subway Franchisee - GST rate - cut benefits to customers - NAA - Taxscan

The National Anti Profiteering Authority (NAA), found that the Dough Maker India which is the franchisee of Subway India is guilty of denying GST rate cut benefits to customers.

It has been alleged that the Respondent,  Dough Maker India has committed the profiteering in respect of restaurant service, despite the reduction in the rate of GST from 18% to 5% w.e.f. November 15, 2017. It was alleged that Respondent has increased the base prices of his products and has not passed on the benefit of reduction in the GST rate from 18% to 5% w.e.f. November 15, 2017, affected vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017.

The DGAP has reported that the summary sheet of the extent of profiteering was prepared by Applicant which was also enclosed with the reference received from the Standing Committee on Anti-profiteering.

The issue was examined by the Maharashtra State Screening Committee and upon being prima facie satisfied that Respondent had contravened the provisions of Section 171 of the CGST Act, 2017, it forwarded the said complaint with its recommendation to the Standing Committee on Anti-profiteering for further action vide its letter.

The coram of Amand Shah and Navneet Goel held that Respondent has denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus committed an offence under Section 171 (3A).

Therefore, the AAR said that the respondent is liable for imposition of penalty under the provisions of the above Section.

However, since the provisions of Section 171 (3A) have come into force w.e.f. January 1, 2020 whereas the period during which violation has occurred is w.e.f. July 1, 2017 to March 31, 2019, hence the penalty prescribed cannot be imposed on Respondent retrospectively.

The Authority as per Rule 136 of the CGST Rules 2017 directed the Commissioners of CGST/SGST to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by Respondent as ordered by this Authority is deposited in the CWFs of the Central and the State Governments as per the details given above. A report in compliance of this order shall be submitted to this Authority by the concerned Commissioner within a period of 4 months.

It has been alleged that the Respondent,  Dough Maker India has committed the profiteering in respect of restaurant service, despite the reduction in the rate of GST from 18% to 5% w.e.f. November 15, 2017. It was alleged that Respondent has increased the base prices of his products and has not passed on the benefit of reduction in the GST rate from 18% to 5% w.e.f. November 15, 2017, affected vide Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017.

The DGAP has reported that the summary sheet of the extent of profiteering was prepared by Applicant which was also enclosed with the reference received from the Standing Committee on Anti-profiteering.

The issue was examined by the Maharashtra State Screening Committee and upon being prima facie satisfied that Respondent had contravened the provisions of Section 171 of the CGST Act, 2017, it forwarded the said complaint with its recommendation to the Standing Committee on Anti-profiteering for further action vide its letter.

The coram of Amand Shah and Navneet Goel held that Respondent has denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus committed an offence under Section 171 (3A).

Therefore, the AAR said that the respondent is liable for imposition of penalty under the provisions of the above Section.

However, since the provisions of Section 171 (3A) have come into force w.e.f. January 1, 2020 whereas the period during which violation has occurred is w.e.f. July 1, 2017 to March 31, 2019, hence the penalty prescribed cannot be imposed on Respondent retrospectively.

The Authority as per Rule 136 of the CGST Rules 2017 directed the Commissioners of CGST/SGST to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by Respondent as ordered by this Authority is deposited in the CWFs of the Central and the State Governments as per the details given above. A report in compliance of this order shall be submitted to this Authority by the concerned Commissioner within a period of 4 months.

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