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GST - Withdrawal of discount by supplier does not amount to profiteering - Flipkart cannot be held accountable for contravention of Section 171 of CGST Act: NAPA

Published: Jul 23, 2018

By TIOL News Service

NEW DELHI, JULY 23, 2018: THE applicant had ordered a Godrej Interio Slimline Metal Almirah through the Respondent Flipkart vide on 04.11.2017 and a tax invoice dated 07.11.2017 was issued to him for an amount of Rs. 14,852/- by M/s Godrej & Boyce Mfg. Co. Ltd., Mumbai (Supplier).

At the time of delivery, another invoice dated 29.11.2017 was issued by the Supplier for an amount of Rs.14,152/ -.

The Applicant had alleged that he had paid an amount of Rs. 14,852/- to the Respondent and the excess amount charged should have been refunded to him; that by not refunding the differential amount, the Respondent was resorting to profiteering which amounted to the contravention of the provisions of Section 171 of the CGST Act, 2017.

The DGAP analysed the invoices and found that in the case of invoice dated 07.11.2017, issued by the Supplier, the gross amount of Rs. 15,352/- could be broken into Rs. 11,993.75/- as base price and Rs. 3358.25/- as GST @ 28% and on the gross amount, a discount of Rs. 500/- was given to the applicant by the Supplier.

So also, the discounted price of Rs. 14,852/- could be further broken into Rs. 11,603.13/- as the base price and Rs. 3248.87/- as the GST@ 28%.

Therefore the DGAP had stated that the base price of the supplier was Rs. 11,993.75/- with discount of Rs. 500/-.

He had also stated that in the case of the invoice dated 29.11.2017 it was apparent that the Supplier had charged GST at the reduced rate of 18% on the base price of Rs. 11,993.87/- and hence the price charged to the Applicant was Rs.14,151.87/-.

The DGAP had, therefore, concluded that the Supplier had charged GST at the prescribed rate of 18% on the base price of Rs. 11,993.87/- and thus he had not increased the earlier base price after coming in to force of the GST. He had also concluded that the discount of Rs. 500/- which was offered earlier had been withdrawn by the Supplier vide his invoice dated 29.11.2017 which did not amount to profiteering .

The DGAP had further concluded that the excess amount of GST paid by the Applicant @ 28% at the time of placing order was to be refunded by the Respondent as the same had been reduced to 18% at the time of delivery on 29.11.2017.

Therefore, the DGAP had recommended that there had been no profiteering by the Supplier viz. M/s Godrej & Boyce Mfg. Co. Ltd., Mumbai.

The DGAP vide his letter dated 11.05.2018 informed that as per the letter dated 27.4.2018 received from the Respondent the excess amount of Rs. 700/- collected from the Applicant had been refunded to him on 18.01.2018.

The Respondent had also stated that he was only offering a market place which enabled the sellers to offer their products for direct sale to the customers for which it was charging commission and the sellers were entirely responsible for the supply of goods and services and for the payment of taxes.

The Respondent had also informed that there were 7254 cases in which the rate of GST at the time of booking of the orders on his platform was higher than the rate of GST prevalent at the time of delivery and the Respondent had initiated the process of refund of the differential amount as per the instructions of the sellers.

During the hearing, the respondent denied the allegation of profiteering made against him on the ground that he was not the Supplier of the Almirah and hence he had not violated the provisions of Section 171 of the Act.

The DGAP further informed vide letter dated 18.6.2018 that the discount of Rs. 500/- which was subsequently withdrawn by the Supplier was given out of the profit margin by the Supplier and hence it could not be treated as an act of profiteering; that the Respondent was not a Supplier and hence the refund of excess tax was distinct from profiteering and hence it did not fall under the ambit of Section 171 of the Act.

The National Anti-Profiteering Authority considered the submissions and observed -

++ It is clear that the Supplier (M/s Godrej & Boyce) had charged correct rates of GST which were prevalent at the time of placing of the order and the supply of the Almirah through the above two invoices, therefore, no illegality had been done by the Supplier while executing the order placed by the Applicant.

++ It is also apparent from the record that the Supplier had not changed the base price of Rs. 11,993.75/- which was prevalent at the time of booking on 4.11.2017, at the time of delivery on 29.11.2017. Hence the Supplier has not resorted to profiteering by increasing his base price or appropriated the excess amount of tax charged from the Applicant and hence the allegation of violation of the provisions of Section 171 of the above Act is not established.

++ It is also apparent that the Respondent was not the Supplier/manufacturer of the Almirah and was only an agent who had offered his platform to the Supplier to sell the Almirah by charging commission, and was also not responsible for collection or refund of GST and hence he cannot be held accountable for contravention of Section 171 of the CGST  Act, 2017.

++ It has also been found that the Supplier has refunded an amount of Rs. 700/- through the Respondent which was charged as tax in excess from the Applicant at the time of the placing of the order.

++ Withdrawal of discount does not amount to profiteering as the same was offered from his profit margin by the Supplier and does not form part of the base price and, therefore, also the Supplier cannot be held guilty under Section 171 of the Act.

Concluding that the allegation of profiteering made by the Applicant against the Respondent as well as the Supplier is not established, the application was held as not maintainable and hence dismissed.