Anti-profiteering notices were served to at least five companies, including a Honda dealer, Hardcastle Restaurants, McDonald's franchisees for West and South India and retailer Lifestyle, for not passing on GST benefits to consumers.
The DG Safeguards also issued a notice to Jaipur-based Sharma Trading for allegedly charging 28% GST on Vaseline when the tax rate had been slashed to 18%.
However, what can really shake the industry is the notice against Hardcastle Restaurant where the probe is based on a complaint that the price of a cup of coffee allegedly remained unchanged despite the government reducing GST from 18% to 5%.
The companies have been asked to provide copies of balance sheets, profit and loss account statements for 2016-17, GST returns for July-December, details of invoice-wise outward taxable supplies, two sample invoices for sale and purchase of goods each and price list before and after November 15.
The new nationwide tax regime has an anti-profiteering clause that allows consumers to complain against companies not passing on the benefits of reduced rates or input tax credit. The notice issued to Pyramid Infratech has said that 36 buyers have accused the builder of not passing on the benefit of input tax credit to them, which would have lowered the total consideration for flats booked under the Haryana Affordable Housing Scheme
A Bareilly-based dealer of Honda Cars India - Vrandavaneshwaree Automotive Ltd. has been accused of allegedly charging higher taxes when a Honda car booked in April but was delivered in July, after GST had been implemented.
In all cases, the complaints have been vetted by the standing committee on antiprofiteering, for which a penalty has been prescribed in the law to ensure that sellers pass on the benefits of lower taxes to consumers or do not overcharge tax. All the entities have been asked to submit documents and replies.
The Directorate General of Safeguards (DGS), entrusted to investigate the cases of profiteering under the new GST regime, had last week served notices to franchisee of McDonald's family restaurant -- Hardcastle Restaurant. Besides, based on complaint filed by a departmental store, the DGS has also sent notices to Sharma Trading Company for not reducing price of a body lotion variant of Vaseline.
The authority has given time till 12 January to these entities to file their reply to the notice stating whether they admit that the benefit of reduction in tax rate or input tax credit has not been passed on to consumers by way of commensurate reduction in prices.
With effect from 15 November, 2017, the government had reduced prices of over 170 goods and services. As per the notice, an individual has complained to the Standing Committee that Lifestyle International Pvt Ltd, Mahagun Mall, Vaishali, Ghaziabad, has "not fully passed on the reduction in rate of tax" from 28 percent to 18 percent on Maybelline FIT Me Foundation.
In the application against Hardcastle Restaurants Pvt Ltd in Mumbai, a consumer has complained that the restaurant has charged the same price for McCafe Regular Latte pre and post the GST rate reduction. The GST rate on restaurants were lowered from 18 percent to 5 percent.
Besides, a departmental store has complained that Sharma Trading Company has not passed on the benefit of GST rate reduction to 18 percent from 28 percent on Vaseline VTM 400 ml.
On 15 December 2017, the DGS had sent notices to UP- based Vrandavanesharee Automotive Pvt Ltd, authorised dealer of Honda Cars, for not passing on tax reduction benefits under GST. Besides, it had received 36 complaints against real estate Pyramid Infratech based in Gurugram, Haryana, for not passing on benefits of cost reduction post GST rollout.
As per the structure of the anti-profiteering mechanism in the GST regime, complaints of local nature will be first sent to the state-level screening committee while those of national level will be marked for the Standing Committee.
If the complaints have merit, the respective committees would refer the cases for further investigation to the Directorate General of Safeguards (DGS). The DG Safeguards would generally take about three months to complete the investigation and send the report to the anti-profiteering authority.
If the authority finds that a company has not passed on GST benefits, it will either direct the entity to pass on the benefits to consumers or if the beneficiary cannot be identified will ask the company to transfer the amount to the consumer welfare fund within a specified timeline.
The authority will have the power to cancel registration of any entity or business if it fails to pass on to consumers the benefit of lower taxes under the GST regime, but it would probably be the last step against any violator.
According to the anti-profiteering rules, the authority will suggest return of the undue profit earned from the Customers along with an 18 percent interest and can also impose penalty for not passing the benefit of tax reduction to the final consumers.