As a result of the recent GST tax reduction, the Starbucks was expected to make relevant cost reduction on its products and supplies, but reflecting fishy, the Tax authorities have questioned about the Brand’s prices and has issued two sets of letters asking about the data to get close to the exact position.
The anti-profiteering authority is looking strict on the aftermath of the GST tax reduction and its impact on the price of the commodities, which looks have been ignored by the coffee chain Starbucks and is likely to be paying fine against this relaxed gesture. The Tax authorities have issued two sets of letters in this context asking about the data details after the implementation of the reduced GST rate.
In reply to which, the Company, Starbucks has shared the data (after the revised GST tax rates) in a detailed reply to the National Anti-profiteering Authority (NAA).
As we know, the Seattle-based Starbucks is the biggest coffee retailer in the world which have its more than 100 stores in India and has been settled its roots here in collaboration with the TATA Company and thus, the joint venture here is known by the name Tata Starbucks. The news is that this action by the anti-profiteering authority is a result of the avoidance of the email which has been not responded by the official spokesperson of Tata Starbucks.
So far as the restaurant business is concerned, the revised GST tax rates had been implemented from early 2018, rates for which rates got reduced from 18% to 5% and in effect to this the Restaurant Businesses could no longer claim input tax credits. This draws the conclusion that the taxes paid on raw materials could not be reduced even in the effect of future tax liabilities.
Here, Starbucks has shared its view and said that the abolishment of ITC from the loop has neutralised the effect of the GST rate cut and thus it is a ‘No Impact’ on the operational cost.
However, this time NAA is not in the mood to consider any advocacy in this context and has made up the mind to charge ‘Fine’ on behalf of the ignorance to the email and notice, thus digging out the ransom chargeable in the form of a fine from the Company.
It is expected that the NAA’s order would come into action in the next few weeks as reported by a related person.
As per the experts, it is quite difficult to access the impact of GST changes on restaurants considering the various operational models which they adopt and the absence of a specific framework for running such businesses.
Read Also: Are Restaurants Charging Correct GST Bills? Know The Complete Details
Abhishek A Rastogi, a partner at law firm Khaitan & Co said, “It is difficult to calculate which expenses are actually cost and how much benefit an entity has gained from the tax rate cut. In the absence of a methodology to compute anti-profiteering, it becomes tough to figure out the quantum of benefits”.
A person from the department talked regarding the development in the context and emphasised that NAA this time is not ready to consider any point and is determined to charge fine against any ignorance and indiscipline.
“NAA’s concern is whether prices were reduced after the GST rate cut and if the benefits of input tax credit were passed on to customers. Starbucks did not reduce prices,” the person said.
As per the tax experts, the anti-profiteering bench in the GST framework is in no way concerned and connected to deal with the reduced input tax credits which could create a problem for the restaurant businesses.
