1. Patanjali Ayurveda Ltd has been fined Rs 75.08 crore by the National Anti-Profiteering Authority (NAA) for not passing the benefits of goods and services tax (GST) rate reduction on to the consumers. According to reports, the NAA has said that Patanjali had increased the price of their washing powder after GST reduction.
2. As the order, available on the NAA website, Patanjali Ayurved has been asked to deposit the amount, along with an 18% interest from the date the amount was collected, in specified consumer welfare funds of central and state governments within three months.
“The respondent (Patanjali) has denied the benefit of tax reduction to consumers in contravention of the Central GST Act,therefore a showcase notice be issued directing it to explain why the penalty should be imposed,” . The NAA has said that the benefits of rate change from 28 per cent to 18 per cent and from 18 per cent to 12 per cent that it implemented in November 2017 have not been passed on to the consumers.
3. The NAA order said it has issued a notice to the company asking why it should not proceed to impose a penalty. It has also ordered GST officials to monitor compliance of the order by the company and file a report.
4. Patanjali has argued that they bore the cost of rate increase when compared to the pre-GST regime and did not pass the cost of increased prices onto the consumers. The NAA did not accept this on the grounds that Patanjali took a business call to not increase prices and that this cannot be a reason for not giving GST reduction benefits to the consumers.
5. The order said it was evident from an assessment that the company has “denied the benefit of tax reduction to consumers in contravention of the provisions of section 171 (1) of CGST Act and has profiteered” as per the explanation attached to this provision. CGST Act mandates that companies have to make an immediate commensurate reduction in price to the consumer when a tax relief in terms of rate cut or input tax credit is given. There, however, is no lock-in period for holding this reduced period.
6. NAA rejected another argument of Patanjali which was that the investigation by the NAA was a violation of Patanjali’s right to do business in the country.
7. The NAA reported that, instead, Patanjali had raised prices of several products and this affects “voiceless, unorganised and vulnerable” consumers.
8. “The contention is not correct since the authority or DGAP has not acted as a price controller or regulator,” the NAA said, adding that, “The authority has only been mandated to ensure that benefits of tax reduction and ITC are passed on to end consumers who bear the burden”.
9. The Director-General Anti-Profiteering (DGAP) has been directed to submit a compliance report on Patanjali within the next four months.
To read the full order click here: http://www.naa.gov.in/docs/1584363630patanjali%20order.pdf