The National Anti-Profiteering Authority (NAA) has rejected charges of Goods and Services Tax (GST) Profiteering against KRBL Limited and held that it did not violate provisions of Section 171 of the Central Goods and Services Tax (CGST) Act, 2017.
The complaint against KRBL Ltd., the world’s largest Basmati Rice exporter, was that the benefit of reduction in the rate of tax on “India Gate Basmati Rice” had not been passed on to the customers. The applicant, Mr. Kumar Gandharv, pointed out that the Maximum Retail Price of the product as well as margin of profit had also been increased by KRBL Ltd.
The Standing Committee examined the charges and forwarded the application to the Director General Safeguards (DGSG) for detailed investigation. On investigation the DGSG found that Input Tax Credit (ITC) became available to KRBL Ltd. after implementation of GST and the tax rate on the packed Basmati Rice carrying brand name “India Gate Basmati Rice” had been increased from Nil to 5%. However, as the brand name was not registered, the KRBL Ltd. started paying 5% GST only after the product had been made taxable by a notification issued by the Central Government in September 2017.
The DGSG after analyzing the returns filed, found that the ITC available as percentage of the total value of taxable supplies during the months of September, October and November 2017 varied between 2.69 % to 3%. Thus, it is clear that the ITC available was insufficient to discharge the GST liability, which necessitated KRBL Ltd. to pay the balance amount of GST in cash. He concluded that as the ITC available was less that the GST liability on the outward supplies no net benefit of ITC could have been passed on to the consumers and therefore there was no violation of the provisions of section 171 of the CGST, 2017.
During the sitting, the Respondent submitted that the prices of rice being an agricultural product, changed frequently because of the market forces and other cost factors and were not solely depended on the tax rates. They also pointed out that the price of paddy had increased by more that 30% in the year 2017 as compared to 2016 which constituted 75% of total cost production. They further contended that due to stiff competition, they had not passed on the total cost burden to the consumers and had to increase the price of their product by 8% only, from Rs.540 to Rs.584 inspite of increase in the raw material cost by more than 30%.
The NAA comprising of Chairman B.N Sharma and Technical Members J.C. Chauhan & R. Bhagyadevi accepted the report of the DGSG and the contentions of the Respondent. They observed that there was no reason for treating the price fixed by the Respondent as violation of the provisions of the Anti-Profiteering Clause.
“Therefore, due to the imposition of the GST on the above product as well as increase in the purchase price of paddy there does not appear to be denial of benefit of ITC as has been alleged by the Applicant as there has been no net benefit of ITC available to the Respondent which could be passed on to the customers.” observed the Members.
Subscribe Taxscan Premium to view the Judgment
