Gaurav Sharma Food Industry denied Benefit of Tax Reduction to Consumers: NAA imposes Penalty [Read Order]

The National Anti-Profiteering Authority (NAA) found M/s Gaurav Sharma Food Industry denied the benefit of tax reduction to consumers and imposed penalty and directed the respondent to deposit the profiteered amount to the Consumer Welfare Funds.

It was alleged that despite the reduction in the rate of GST from 18% to 5% with effect from  November 15, 2017, the Respondent, M/s Gaurav Sharma Food Industry had not passed on the commensurate benefit of tax reduction as he had increased the base prices of his products.

The DGAP has also stated that based on a careful examination of the case record, including the reference received from the Standing Committee on Anti-Profiteering, various replies of the Respondent and the documents/evidence placed on record, it emerged that the main issues for determination were whether the rate of GST on the service supplied by the Respondent was reduced from 18% to 5% with effect from  November 15, 2017, and if so, whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to his recipients, in terms of Section 171 of the CGST Act 2017.

The DGAP has also stated that after establishing the fact of profiteering, the next step was to quantify the same and only those items, where the increase in the base prices was more than what was required to offset the impact of denial of ITC, were considered and the calculation of the profiteered amount was carried out following the principle.

The Authority headed by Dr. B.N. Sharma held that the 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 resorted to profiteering. Hence, he has committed an offense under section 171 (3A) of the CGST Act, 2017, and therefore, he is liable to penal action under the provisions of the above Section.

Accordingly, the authority issued a notice to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him