In a first of its kind ruling, the National Anti Profiteering Authority (NAA) Monday ruled that suppliers will be liable to pay penalty for not passing the benefits of GST rate reduction on sale of goods. The NAA gave its ruling in a case against Jaipur-based Sharma Trading Company, wherein it was alleged that the supplier had not reduced the price of 'Vaseline' in line with the reduction of GST rate and thus indulged in profiteering in contravention of Scetion 171 of CGST Act.
The application, which was filed by a Departmental Store was examined by Standing Committee on anti profiteering and was referred to Directorate General of Anti Profiteering (DGAP) for detailed investigation.
The DGAP found that the quantum of benefit was not passed to the departmental store by the supplier on November 15, 2017 following reduction of GST rate to 18 percent from 28 percent.
Sharma Trading Company, the distributor and stockist of Hindustan Unilever Ltd, had contended that it has purchased from HUL the product on which GST was levied at 28 percent and sold the same to the departmental store. It also contended that profit was made by HUL and not Sharma Trading.
The NAA, in its 24-page order, said that Sharma Trading will be liable to pay penalty under section 122 of CGST Act.
As per Section 122 supplier of any goods or services without issue of invoice or incorrect / false invoice is liable to pay "a penalty of Rs 10,000 or an amount equivalent to the tax evaded or the tax not reduced under section 31 or short-deducted or deducted but not paid to the government..., whichever is higher".
However, before imposing the penalty, the NAA has given a notice to Sharma Trading Company as to why it should not be imposed on the company.
Commenting on the order, AMRG & Associates Partner Rajat Mohan said: "This ruling by NAA has made it clear that anti-profiteering provisions apply to each supplier for its supplies, and in no case burden can be shifted to any other person in the supply chain. This would bring small traders and shopkeepers also under the umbrella of anti-profiteering regulations".
First Published: IST