NAA finds distributor guilty of profiteering under GST, orders probe against VIP Industries

The anti-profiteering authority has found a distributor of backpack and trolley guilty of not passing GST rate cut benefits of Rs 18,887 to consumers and has also asked the investigation arm to probe whether its manufacturer VIP Industries has made any undue profit.

The order of the National Anti-Profiteering Authority (NAA) was passed against Kerala-based VTWO Ventures with regard to sale of 'Tropic 45 Weekender Black' (Backpack) and 'Neolite Strolly' (Trolley), following investigation of its books by the Directorate General of Anti-Profiteering (DGAP) for the period between November 15, 2017, and August 31, 2018.

VIP Industries manufactures 'Tropic 45 Weekender Black' and 'Neolite Strolly'.

The DGAP in its investigation has found that despite reduction in GST rate from 28 per cent to 18 per cent, the distributor (VTWO Ventures) did not reduce the sale price of the products on the pretext that the he has been following the pricing structure of the manufacturer and that his distributor margin had not increased and, hence, he had not derived any additional benefit on reduction in GST rate.

The DGAP in its report has found that the amount profiteered by in respect of supplied of the product during November 15, 2017, to August 31, 2018, is Rs 18,887.

"... 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," the NAA order said.

It also directed the company to deposit the profiteered amount to the Consumer Welfare Fund, along with 18 per cent interest within 3 months.

The NAA, further said, that VTWO Ventures has claimed that he had been following the pricing structure of the manufacturing company and that his distributor's margin had not increased and, hence, he had not derived any additional benefit on account of the reduction in tax rate 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, most orders by NAA were passed 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.