GSTAT Holds Distributor of L’Oréal India Products Guilty for Not Passing GST Rate-Cut Benefits to Consumers [Read Order]
GSTAT held L’Oréal distributor guilty of profiteering Rs. 3.31 lakh by not passing on GST rate-cut benefits to consumers and directed deposit with 18% interest into the Consumer Welfare Fund
The Principal Delhi Bench of the Goods andServices Tax Appellate Tribunal (GSTAT) ruled that Raj & Co., a distributor of L’Oréal India, was guilty of profiteering by not passing on the benefit of the reduction in GST rates to its customers.
Raj & Co. was investigated for the period between April 2018 and December 2018 after complaints that despite the GST rate on cosmetics being reduced from 28% to 18% from November 15, 2017, the selling prices charged to consumers remained the same.
Are You GST Compliant? Get the Clarity You Need on RCM - Click here
The Director General of Anti-Profiteering (DGAP) found that Raj & Co. increased the base prices of the goods so that the effective benefit of the reduced tax rate was not passed on, and calculated profiteering at Rs. 3,31,879.
The respondent’s counsel argued that all billing was done through L’Oréal’s “Suvidha” software, leaving no scope for manipulation by the distributor, and submitted that responsibility for pricing lay with the manufacturer. They also argued that since L’Oréal itself had already been penalised for profiteering in relation to the same products, the respondent should not be penalised again.
The DGAP countered that Raj & Co. was an independent registered supplier under GST and was legally obliged to pass on the benefit to its customers. They pointed out that the distributor could not shift responsibility to L’Oréal or its software, as invoices could have been raised differently, and the law places the duty of passing on the benefit on every supplier in the chain.
L’Oréal India’s counsel also submitted that Raj & Co. had the contractual freedom to sell at lower prices or offer discounts and could not escape liability by blaming the manufacturer.
The bench comprising Justice (Retd.) Dr. Sanjaya Kumar Mishra observed that there was a clear reduction in GST rates and no commensurate reduction in prices by the respondent. It explained that Section 171 of the CGST Act creates a statutory obligation on each supplier to pass on tax benefits, and the respondent’s reliance on software or L’Oréal’s actions did not absolve its duty.
The tribunal pointed out that similar arguments had already been rejected in earlier proceedings and that the respondent had discretion to reduce prices or offer discounts but chose not to do so.
The tribunal held that Raj & Co. profiteered by Rs. 3,31,879 and directed it to deposit the amount along with 18% interest from the date of collection into the Consumer Welfare Fund of the Centre and State within three months. A compliance report was ordered to be submitted within four months by the jurisdictional Commissioner. The appeal was dismissed.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
