Anti-profiteering body turns heat on e-tailers, seeks a pan-Indian audit

The development comes after NAA discovered that Flipkart alone had 7,500 cases of overcharging GST on account of change in rate between placing an order and delivery

The National Anti-profiteering Authority (NAA) under the goods and services tax (GST) has stepped up pressure for a pan-Indian audit of the e-commerce industry on the basis of an order linked to Flipkart. NAA Chairman B N Sharma has written to his indirect tax department counterpart for an industry-wide audit after the director general (audit) turned down a request for investigating e-commerce firms.             

The Flipkart case pertains to profiteering arising from a difference in the GST rate between placing an order and the delivery of the item, at 28 and 18 per cent, respectively. Subsequently, Flipkart issued a refund to the complainant. On the basis of a single complaint, the NAA discovered that Flipkart alone had 7,500 similar cases of overcharging GST on account of change in rate between placing an order and delivery.

In a latest development, the NAA has also asked Flipkart to issue a certification that refunds have been issued in each of the 7,500 cases of overcharging GST.

Confirming that the NAA chairman has written to the CBIC chief, asking for an audit of the e-commerce industry, an official said, “Imagine if one company alone has 7,500 such cases, how many similar cases would be there for the entire industry.” 

Earlier, the DG Audit had turned down the NAA’s request for an investigation into the entire industry, saying the CBIC board had prevented such a move.  

In his letter to CBIC Chairman S Ramesh, Sharma has pointed out that one complaint by a consumer-led to the discovery of 7,500 cases on a single platform. So, in all likelihood, there could be tens of thousands of cases on other platforms too, he added. “The CBIC has a particular vertical of audit and they should do a special audit according to the GST Act on e-commerce platforms,” Sharma said in the letter.

The GST Council had reduced rates for over 200 items of common use in a meeting on November 10, 2017, in Guwahati. The rates of 178 items were reduced from 28 to 18 per cent. They included chewing gum, shampoo, detergent, chocolates, beauty products, sanitary ware, and leather clothing. These changes came into effect from November 15 last year.

In the Council meeting last month on July 21, the GST rates were cut on nearly 100 items, including refrigerator, washing machine and small screen TV sets, perfumes, cosmetics, vacuum cleaners, and shavers.

In the Flipkart case, petitioner Rishi Gupta had alleged he had ordered a Godrej almirah through the Bengaluru-based firm on November 11, 2017. On that, a tax invoice of Rs 14,852 was issued to him by Godrej & Boyce Manufacturing Co. However, at the time of delivery, another invoice of Rs 14,152 was issued on November 29 as the GST was cut from 28 to 18 per cent on that product. 

However, he did not get the benefit of lower tax rate, for which he sought a refund and filed a profiteering complaint against Flipkart. 

According to the anti-profiteering rules under GST, “benefits of input tax credit should have been passed on to the recipient by way of commensurate reduction in prices.” The anti-profiteering mechanism is a three-stage process. There is a state-level screening committee for local complaints and a standing committee for national-level complaints. This is followed by an investigation by the Directorate General of Safeguards, and a probe by the decision-making body--National Anti-Profiteering Authority.

After a complaint gainst Flipkart, the company issued a refund
 

• The National Anti-profiteering Authority (NAA) directed Flipkart to issue refund for each of 7,500 similar cases
• The NAA asked the DG Audit to investigate the entire e-commerce sector, which the latter refused
• NAA chairman has now written to CBIC chairman, seeking sector-wise audit