The National Anti-profiteering Authority (NAA) has held that when the effective tax rates for the impugned product increased post GST and the assessee still maintained the same MRP and the reduction in base price was more than the increase in ITC, there is no profiteering by the assessee.

A complaint was filed against the respondent for alleged profiteering on supply of the products ‘Bathing Bar’ and ‘Instant Drink Powder 50 grams’. The complainant stated that the tax rate on these products was reduced to 18% in GST regime as against 12.5% excise duty and 14.5% VAT earlier. The respondent submitted that he was procuring these goods on payment of 14.5% VAT which has increased to 18% under GST and hence, he was suffering loss of margin on supply of both the products post GST implementation. Accordingly, there was no benefit to pass on.

The DGAP had noted that the respondent was procuring the impugned goods from manufacturers who were claiming the benefit of excise exemption/ concession and therefore, the effective tax rate on the said products in the pre-GST regime was 14.5%/ 16.5% and not 27% as claimed by the applicant.

The DGAP also noted that the respondent has supplied the impugned product at the same MRP even though the tax rates had increased, thereby suffering a loss from his own margins and hence there was no profiteering. The DGAP had also observed that the supplier to the respondent had increased the transaction value for supply of bathing bar to the respondent, however the respondent still maintained the same MRP and effectively reduced his base price.