FMCG GST Rate Cut Benefit Must Reach Each Customer, Cannot be Offset Against Other Discounts: GSTAT [Read Order]

The Goods and Services Tax Appellate Tribunal (GSTAT), Principal Bench, New Delhi, has confirmed an anti-profiteering demand of Rs. 13,61,51,254 against Lifestyle International Pvt. Ltd. for failing to pass on GST rate reduction benefits on FMCG products.

The Division Bench of Justice (Retd.) Dr. Sanjaya Kumar Mishra (President) and Anil Kumar Gupta (Technical Member) held that the benefit of GST rate reduction must reach each customer. It cannot be adjusted against discounts or benefits allegedly given to other customers.

The case began with a complaint by Neeru Varshney, who purchased “Maybelline Fit Me Foundation” from Lifestyle International. She alleged that the respondent did not pass on the GST rate cut from 28% to 18%, which came into effect from November 15, 2017.

In the first round, the DGAP found profiteering of Rs. 15,861 in relation to the product purchased by the complainant. The National Anti-Profiteering Authority directed refund of Rs. 41 to the complainant and deposit of the balance amount in Consumer Welfare Funds.

The authority also ordered further investigation after Lifestyle International claimed that although some amount may not have been passed on to the same customers, larger benefits had been passed on to other customers through price reductions.

After reinvestigation, the DGAP recalculated the profiteered amount at Rs. 13,61,51,254 for the period from November 15, 2017 to January 31, 2018. The DGAP compared pre-rate-reduction average base prices with post-rate-reduction invoice-wise prices across about 25.97 lakh transactions.

Lifestyle International raised several objections. The counsel argued that the wider investigation into other products was without jurisdiction. They also argued that the proceedings did not survive after omission of rules relating to the erstwhile NAA. They further challenged the DGAP’s methodology and argued that discounts given to some customers should be considered.

The tribunal rejected these arguments. It observed that the authority had power to direct further investigation and relied on the Delhi High Court ruling in Reckitt Benckiser India Pvt. Ltd. v. Union of India, which upheld expansion of anti-profiteering probes beyond the original complaint.

On the core issue, the tribunal held that Section 171 requires benefit to be passed on to the actual recipient. A supplier cannot deny benefit to one buyer and claim set-off by giving a higher discount to another buyer.

The tribunal accepted the DGAP’s computation and directed Lifestyle International to deposit Rs. 13.61 crore in Consumer Welfare Funds. It held that interest and penalty were not applicable as the relevant provisions came into force after the profiteering period.