The National Anti-Profiteering Authority (NAA) has come down heavy on
Jubilant FoodWorks, the operator of the Domino's Pizza chain in India.
The chain has been found guilty of not passing on GST tax cut benefit to
its consumers during the period November 15, 2017, to May 31, 2018, and
the
company has been directed to deposit the illegal gains worth Rs
41.42 crore with the government. The authority has also asked it to
reduce prices of its products by way of commensurate reduction in taxes.
In
November 2017, the same month that NAA was set up, the GST Council had
cut tax rates for all restaurants - except the ones located within
hotels with room tariffs of Rs 7,500 and above - to 5%. Prior to
reduction, GST was 18% for air-conditioned (AC) restaurants and 12% for
non-AC restaurants. But restaurateurs by and large have claimed that it
was difficult to pass on rate cut benefits to the customer because the
Council had also rolled back the benefit of Input Tax Credit (ITC) for
the restaurant industry - a move that impacted their profitability by
10-18% and limited their capacity to make price cuts.
In the case
of Jubilant FoodWorks, the NAA passed the order on an email complaint
filed by a customer that Domino's had not reduced the prices of its
Stuffed Garlic Bread and Medium Veg Pizza despite the GST rate cut.
"The
Respondent is directed to refund to the applicant an amount of Rs 5.65
along with interest at 18 per cent from the date of charging the above
amount from him till its refund," read the NAA order, adding that the
company has to deposit the balance amount of Rs 41,42,97,629.25 in the
ratio of 50:50 in the Central and the State Consumer Welfare Funds along
with interest @18 per cent till the same is deposited, within a period
of three months.
"It is clear that the Respondent has resorted to
profiteering by charging more price than what he could have charged by
issuing wrong tax invoices. He [Jubilant] has further acted in conscious
disregard of the obligation which was cast upon him by the law, by
issuing incorrect invoices in which the base prices were deliberately
enhanced more than what he was entitled to increase due to denial of ITC
and thus he had denied the benefit of reduction in the rate of tax,"
the NAA said.
The authority has also issued a show cause notice to
Jubilant FoodWorks to explain why penalty should not be imposed on the
company. Significantly, it has asked the Directorate General of
Anti-Profiteering (DGAP), which investigated the case, to conduct
further investigation for period post last May to check for subsequent
compliance.