The true intent of Section 171 CGST Act is to pass on the benefits to the common buyers who bear the burden of tax says NAA
Case: M/s. PVR Ltd.
Forum: National Anti-Profiteering Authority
The Applicant filed an application under Rule 128 (1) of the CGST Rules. 2017. alleging profiteering by the Respondent in respect of supply of “services by way of admission to exhibition of cinematograph films” despite reduction in the rate of GST from 28% to 18% w.e.f. 01 01.2019. The Applicant No, 1 also alleged that while the GST rate was reduced from 28% to 18% vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 and the Respondent had increased the base prices.
The following issues were placed for consideration befor the Authority;
a) Whether the Respondent has passed on the commensurate benefit of reduction in the rates of tax to his customers?
b) Whether there was any violation of the provisions of Section 171 of the CGST Act. 2017 committed by the Respondent?
After comparing the average selling prices pre rate reductions and the actual selling prices post rate reduction, as per the details submitted by the Respondent, it has been found that the Respondent has profiteered an amount of Rs. 13,51,519/-, thus the benefit of reduction in the GST rates was not passed on to the recipients by way of commensurate reduction in the prices by the Respondent, in terms of Section 171 (1) of the CGST Act, 2017. However, it has been confirmed by the DGAP that the Respondent has reduced his prices commensurately w.e.f. 07.01.2019.
The contention of the Respondent that there were no specific guidelines or methodology prescribed under the CGST Act for passing on the rate reduction benefit is frivolous as the Procedure and Methodology for passing on the benefits of reduction in the rate of tax and ITC or computation of the profiteered amount has been outlined in Section 171 (1) of the CGST Act. 2017 itself.
The provisions of Section 171 (1) are abundantly clear, unambiguous, mandatory and legally enforceable. The above provisions also reflect that the true intent behind the above provisions, made by the Central and the State legislatures in their respective GST Acts, is to pass on the above benefits to the common buyers who bear the burden of tax. Therefore, no guidelines or methodology or clarifications were required to be issued for passing on the benefit of tax reductions. The Respondent was only required to reduce selling prices of the tickets by taking in to account the reductions in the tax rates which he has failed to do.
The Respondent is legally bound to pass on the benefit of tax reductions to his customers as per the provisions of Section 171 and hence. he cannot refuse to pass it on. There is also no evidence on record which can prove that he had already passed on the benefit of tax reductions and hence he was not required to reduce his prices further.
The Authority thus held that the Respondent has contravened the provisions of Section 171 (1) of the CGST Act, 2017.
Vox Analytica GST
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