By TIOL News Service

NEW DELHI, APRIL 27, 2018: THE applicant had entered in to a contract on 28.04.2017 for supply of a Honda Car through the respondent, an authorised dealer of M/s Honda Car India Ltd. at Bareilly, for an amount of Rs. 9,13,300/- which included Excise Duty @ 35%, Central Sales Tax (CST) @ 02% and UP Value Added Tax (VAT) @ 14% (Total 51%).

The applicant states that he had taken delivery of the Car on 11.07.2017 after coming into force of the GST w.e.f. 01.07.2017, by paying an amount of Rs. 8,98,750/-. He had further stated that after 01.07.2017 the respondent was required to reduce the Excise Duty, CST and VAT amounting to 51% from the price of the Vehicle of Rs. 9,13,300/- and then charge SGST @ 14%, CGST @ 14% and Cess @ 1% (Total 29%) on the reduced price. He has, therefore, alleged that he was not given benefit of reduced rate of Tax which amounted to profiteering by the respondent and hence action should be taken against him.

The applicant filed an application with the Standing Committee and the matter was referred to the DGSG for detailed investigation under rule 129 (1) of the CGST Rules, 2017.

The DGSG found that the contention of the applicant that the total incidence of tax on the car was reduced from 51% to 29% post-GST was not correct as there was a minor reduction in the tax rate in the post-GST period and the tax rate had remained more or less the same. [Pre-GST Rate 31.254% & Post-GST Rate 29%] [Table 'A' refers]

The pre-GST and post-GST ex-showroom prices of the car purchased by the applicant were also worked out by the DGSG [Pre-GST Rs. 9,09,300/- and Post-GST Rs.8,98,750/- thus Benefit passed on to the applicant (excluding Rs.4,000/- reduced for change in colour) Rs.10,550/-] [Table 'B' refers]

The DGSG, therefore, held in his report that provisions of Section 171(1) of the CGST Act, 2017 requiring that "any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices" had not been contravened in the present case.

Accordingly, after considering the investigation report submitted by the DGSG, a hearing was scheduled but the applicant informed that he would not be able to attend the same due to poor health. However, the applicant made written submissions.

The National Anti-profiteering Authority recorded that the following two points pertaining to the allegations of profiteering against the respondent need to be decided as per the provisions of Section 171 of the CGST Act, 2017 -

i. Whether there was a substantial reduction in the rate of tax on the cars after the GST was implemented w.e.f. 1st July 2017 as claimed by the applicant and whether the benefit as emanating from such reduced tax rate has not been passed on to the applicant in the form of commensurate reduction in the price of the car purchased by him.

ii. Whether any input tax credit benefit was to be passed on to the applicant by the respondent.

The authority held –

Point no. (i):

+ It has been found from the record that the rate of tax both during pre-GST era as well as the post GST era was a matter of fact which has been clearly delineated in detail by the DGSG in his report dated 23.02.2018.

+ It has also been found that the applicant's contention that the pre-GST rate of tax which was 51% was reduced to 29% in post GST era, was factually incorrect as the pre-GST rate of tax, on the car contracted to be purchased by the applicant, was leviable at 31.254% which was rationalized to 29% (CGST-14%+SGST-14%+Cess-1%), thus there was a reduction of only about 2%.

+ It is also clear from the Table 'B' that though the car of premium colour was booked at an amount of Rs. 9,13,000/- at pre-GST tax rate but when the applicant took delivery of the 'base colour' car on 11.7.2017 in the post GST period, the respondent had charged the applicant an ex-showroom price of Rs. 8,98,750/-, which correctly included basic price of the car, freight, insurance, dealer's margin etc. and GST @ 29%.

+ Thus, the benefit of reduction in the tax rate was passed on to the applicant by way of reduction in the price of the car of base colour by an amount of Rs. 10,550/-.

Point no. (ii):

+ The applicant in his initial application dated 1.11.2017 had not mentioned anything with regard to not passing of the Input Tax Credit (ITC) benefit.

+ We are of the view that the applicant has not understood the provisions of Section 171 of the CGST Act, 2017 and the DGSG's report in its true spirit and context. The entire scheme of GST is ITC based i.e. the recipient of the goods and services takes credit of GST paid by him on purchase of goods and services and uses such ITC while discharging GST output tax liability on supply of goods and services.

+ The respondent has given details of all the basic components of the price of the car purchased by the applicant as has been mentioned in Table 'B' and benefit of Rs. 10,550/- on account of reduction of tax by about 2% viz. from 31.254% (pre GST) to 29% (post GST) has already been passed on to the applicant and the amount of Rs. 10,550/- is inclusive of the ITC as has been calculated in Table 'B'. Therefore, no additional benefit on account of ITC is required to be paid by the respondent. Thus, the contention of the applicant made in his letter dated 15.03.2018 is not valid and deserves to be rejected.

Conclusion: The respondent has not contravened the provisions of Section 171 of the CGST Act, 2017.No merit found in the application,hence dismissed.

(See 2018-TIOL-01-NAA-GST)