The Applicant has alleged profiteering, in respect of restaurant service supplied by the respondent franchisee i.e. M/s Subway Systems India Pvt. Ltd. It was alleged that despite the reduction in the rate of Goods and Service Tax (GST) from 18% to 5%, the respondent had increased the base prices of his products and had not passed on the commensurate benefit of reduction in the GST rate from 18% to 5%.

Consequently, the DGAP, while calculating the profiteered amount added a 5% notional amount which was charged and collected from customers on the profiteered amount and deposited with the Government.

The respondent contended that the Respondent has further contended that the DGAP, while calculating the profiteered amount, was wrongly added a 5% notional amount without explaining any reasons and hence, the profiteered amount be reduced appropriately. Therefore, the addition of this 5% amount should be removed and hence the profiteered amount should be reduced.

The National Anti-Profiteering Authority (NAA) while relied on Section 171 (1) and (2) of the CGST Act, 2017 which mandate that the benefit of reduction in the tax rate is to be passed on to the recipients/ customers by way of commensurate reduction in price, which includes both, the base price and the tax paid and upheld the report submitted by the DGAP.

“The DGAP in his Report has stated that the Respondent had increased the base prices of different items by more than 7.39% i.e. by more than what was required to offset the impact of denial of ITC, supplied as a part of restaurant services to make up for the denial of ITC post-GST rate reduction and on comparison of pre and post GST rate reduction prices of the items sold in respect of items sold,” the authority observed.