In an investigation from the anti-profiteering authority, a distributor of backpack and trolley was found guilty of not passing GST rate cut benefits of INR 18,887 to consumers. Also, he has been enquired about whether its manufacturer VIP industries has earned any undue profit.
The National Anti-Profiteering Authority (NAA) has passed an order against Kerala-based VTWO Ventures for the sale of ‘Tropic 45 Weekender Black’ (Backpack) and ‘Neolite Strolly’ (Trolley). The order was issued following investigation of its books by the Directorate General of Anti-Profiteering (DGAP) during the time period between November 15, 2017, and August 31, 2018.
‘Tropic 45 Weekender Black’ and ‘Neolite Strolly’ are the listed products of VIP manufacturers.
Going by the investigation of the DGAP, it has been found that the distributor (VTWO Ventures) did not reduce the GST rate from 28 per cent to 18 per cent which in turn the sale price of the products remained same. Thus, the distributor continues to follow the pricing structure of the manufacturer and no increment witnessed in his margin and hence, the distributor did not make any additional benefit on reduction in GST rate.
Not even this, the DGAP mentioned the profiteered amount of INR 18,827 in its report which the distributor earned against the supplied products during the time period of November 15, 2017, to August 31, 2018.
The NAA order quoted that “… We find that the Respondent (VTWO Ventures) has acted in contravention of the provisions of Section 171 of the CGST Act, 2017, in as much as he did not pass on the benefit of reduction in the rate of tax to his recipients by way of commensurate reduction in the prices”.
In addition to this, the company is ordered to deposit the profiteered amount to the Customer Welfare Fund concluding 18 per cent interest within the time period of 3 months.
Further, The NAA said, that VTWO Ventures has affirmed its policy to following the pricing structure of the manufacturing company. Consequently, no additional benefit was collected from the distributor besides the tax rate reduced from 28 per cent to 18 per cent
“Accordingly, the DGAP is directed to investigate the aspect of profiteering by the above-said manufacturer (VIP Industries),” it said.
EY Tax Partner Abhishek Jain said until now, NAA has passed several orders against the dealers and distributors of major industry players.
“A directional Order to investigate against the manufacturing company is uncommon and where a similar trend is followed, may open a Pandora’s box for many large players,” Jain added.
