The investigation arm of the Revenue Department has sent notices under the GST anti-profiteering law to three entities, including retail shopping outlet Lifestyle International, for allegedly not passing benefit of cost reduction to consumers. The Directorate General of Safeguards (DGS), entrusted to investigate the cases of profiteering under the new Goods and Services Tax (GST) regime, had last week served notices to franchisee of McDonald’s family restaurant — Hardcastle Restaurant. Besides, based on complaint filed by a departmental store, the DGS has also sent notices to Sharma Trading Company for not reducing price of a body lotion variant of ‘Vaseline’.
The authority has given time till January 12 to these entities to file their reply to the notice stating whether they admit that the benefit of reduction in tax rate or input tax credit has not been passed on to consumers by way of commensurate reduction in prices.
These entities have been asked to submit copies of balance sheet, profit and loss account of 2016-17, GST returns for July-September and details of invoice wise outward taxable supplies, price list prior to and post November 15, 2017, according to the notices posted on DGS website.
With effect from November 15, 2017, the government had reduced prices of over 170 goods and services.
As per the notice, an individual has complained to the Standing Committee that Lifestyle International Pvt Ltd, Mahagun Mall, Vaishali, Ghaziabad, has “not fully passed on the reduction in rate of tax” from 28 per cent to 18 per cent on Maybelline FIT Me Foundation.
In the application against Hardcastle Restaurants Pvt Ltd in Mumbai, a consumer has complained that the restaurant has charged the same price for ‘McCafe Regular Latte’ pre and post the GST rate reduction. GST rate on restaurants were lowered from 18 per cent to 5 per cent.
Besides, a departmental store has complained that Sharma Trading Company has not passed on the benefit of GST rate reduction to 18 per cent from 28 per cent on ‘Vaseline VTM 400 ml’. The recent notices by the DGS is in addition to two more sent to 2 entities last month. On December 15, 2017, the DGS had sent notices to UP- based Vrandavanesharee Automotive Pvt Ltd, authorised dealer of Honda Cars, for not passing on tax reduction benefits under GST. Besides, it had received 36 complaints against real estate Pyramid Infratech based in Gurugram, Haryana, for not passing on benefits of cost reduction post GST roll out.
As per the structure of the anti-profiteering mechanism in the GST regime, complaints of local nature will be first sent to the state-level ‘screening committee’ while those of national level will be marked for the ‘Standing Committee’.
If the complaints have merit, the respective committees would refer the cases for further investigation to the Directorate General of Safeguards (DGS). The DG Safeguards would generally take about three months to complete the investigation and send the report to the anti-profiteering Authority.
If the Authority finds that a company has not passed on GST benefits, it will either direct the entity to pass on the benefits to consumers or if the beneficiary cannot be identified will ask the company to transfer the amount to the ‘consumer welfare fund’ within a specified timeline.
The authority will have the power to cancel registration of any entity or business if it fails to pass on to consumers the benefit of lower taxes under the GST regime, but it would probably be the last step against any violator.
According to the anti—profiteering rules, the authority will suggest return of the undue profit earned from not passing on the reduction in tax to consumers along with an 18 per cent interest as also impose penalty. PTI JD MKJ 01012141