Page 31 - GSTL_21st May 2020_Vol 36_Part 3

2020 ] LEVY OF GST AND PROFITEERING ON SUPPLY OF SANITARY NAPKINS J57

LEVY OF GST AND PROFITEERING ON
SUPPLY OF SANITARY NAPKINS
By
Dr. Sanjiv Agarwal, FCA, FCS

Recently in two orders of National Anti-
Profiteering Authority has confirmed profiteering on the
supplier of sanitary napkins for selling the goods at pre-
rate reduction MRP whereas the rate of GST on sanitary
napkins was reduced from 12% to Nil w.e.f. 27-7-2018
vide Notification No. 19/2018-C.T. (Rate), dated 26-7-
2018.
Sandeep Puri, CGST, Mumbai and DGAP, New Delhi v. Glenmark Pharma-
ceutical Ltd., Mumbai - (2019) 10 TMI 934; (2019) 110 taxmann.com 405 (NAA) -
Order dated 21-10-2019.
In the instant case, it was alleged that the supplier of sanitary napkins
sold the goods at pre-rate reduction MRP whereas the rate of GST on sanitary
napkins was reduced from 12% to Nil w.e.f. 27-7-2018 vide Notification No.
19/2018-C.T. (Rate), dated 26-7-2018. The complaint was examined by the Stand-
ing Committee on Anti-profiteering and investigated by DGAP.
The supplier submitted that it had sent a communication to all his dis-
tributors announcing the reduction in MRP of his product and the new reduced
price (MRP) for each pack was also conveyed to the distributors, stockists and
retailers and the inventory sold by them after 26-7-2018 was at a price lower than
the MRP of the products and also claimed that it was advertised in one of the
leading newspapers, informing the public at large about the reduction in the
MRP of the product.
DGAP observed that the old stocks were being sold at the same MRP
prevailing prior to the reduction of GST rate. The Report also stated that neither
the GST rate nor the price was indicated on the invoice except the MRP of the
product. This MRP also did not indicate that there was commensurate reduction
in price charged from the ultimate consumers. Ratio of input tax credit of taxable
turnover was worked at 8.39% which became part of cost offer the rate of GST
was reduced from 12% to Nil rate. Thus, there was a loss of ITC @ 8.39%. In fact
supplier had increased the base prices of the product in question when the GST
rate was reduced from 12% to Nil.
The amount profiteered on 12 products amounted to ` 42,52,370 as the
supplier had failed to pass on the benefit of rate reduction to his customers. Ac-
cordingly, the respondent was directed to reduce his prices by way of commen-
surate reduction keeping in view the reduced rate of tax and benefit of ITC
which has been availed by it as per Rule 133(3)(a). Further, it was directed to de-
posit the above amount as per the provisions of Rule 133(3)(c) in the ratio of
50:50 in the Central or the State CWFs of the State of Madhya Pradesh, along
with the interest @ 18% till the same is deposited. The concerned Commissioner-
ate was directed to ensure compliance and recovery.
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