Profiteering Charges can’t be made against Restaurant for Increase in Base Price to Compensate Denial of ITC post Rate Reduction: NAA [Read Order]

The National Anti-profiteering Authority (NAA) has deleted the profiteering charges against N P Foods (a franchisee of M/s Subway India) by holding that an increase in base price to compensate for denial of Input Tax Credit after the Government reduced the GST rate would not amount to profiteering.

The applicant approached the Anti-Profiteering Authority alleging that respondent had not passed on benefit of reduction in rate of GST in restaurant service when he had purchased “6 Hara Bhara Kabab Sub”. It was alleged that the respondent had increased base price of product when GST was reduced from 18% to 5%.

“It is apparent from the facts of the case that the Respondent had increased the base price of his products to make good the loss which had occurred due to denial of ITC post GST rate reduction. It is further revealed that the Respondent had increased the average base price by 12.14% to neutralize the denial of ITC of 11.80% and such increase is commensurate with the increase in the cost of the product on account of denial of ITC. Therefore, the allegation of not passing on the benefit of rate reduction is not established against the Respondent. As far as the issue of profiteering of Rs. 4521- made on the supply of the products on 14.11.2017 is concerned the same can not be termed as profiteering in terms of section 171 of CGST Act, 2017 as there was no rate reduction on 14.11.2017 as the same had occurred w.e.f. 15.11.2017 only,” the authority said.