GST Tribunal Slams Raj & Co. for Profiteering, Orders Deposit of Profiteered Amount
The Principal Delhi Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) has ruled that Raj & Co., a distributor
By: : Kashish Singh
Update: 2025-08-30 05:00 GMT
GST Tribunal Slams Raj & Co. for Profiteering, Orders Deposit of Profiteered Amount
Introduction
The Principal Delhi Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) has ruled that Raj & Co., a distributor of L'Oréal India, was guilty of profiteering by not passing on the benefit of the reduction in GST rates to its customers.
Factual Background
The GST rate on cosmetics was reduced from 28% to 18% from November 15, 2017. Despite this reduction, Raj & Co. did not reduce the selling prices of the goods, resulting in profiteering. The Director General of Anti-Profiteering (DGAP) calculated the profiteering amount at ₹3,31,879.
Procedural Background
The DGAP investigated Raj & Co. for the period between April 2018 and December 2018 after complaints were received. The GSTAT bench comprising Justice (Retd.) Dr. Sanjaya Kumar Mishra held that Raj & Co. had a statutory obligation to pass on the tax benefits to its customers.
Contentions of Parties
Raj & Co.: The respondent's counsel argued that the billing was done through L'Oréal's "Suvidha" software, leaving no scope for manipulation, and submitted that responsibility for pricing lay with the manufacturer.
DGAP: The DGAP countered that Raj & Co. was an independent registered supplier under GST and was legally obliged to pass on the benefit to its customers.
L'Oréal India: L'Oréal India's counsel submitted that Raj & Co. had contractual freedom to sell at lower prices or offer discounts and could not escape liability by blaming the manufacturer.
Reasoning and Analysis
The GSTAT bench observed that there was a clear reduction in GST rates and no commensurate reduction in prices by Raj & Co. The tribunal held that Section 171 of the CGST Act creates a statutory obligation on each supplier to pass on tax benefits, and Raj & Co.'s reliance on software or L'Oréal's actions did not absolve its duty.
Implications
The GSTAT's decision highlights the importance of passing on the benefits of tax rate reductions to customers. The ruling emphasizes that each supplier in the chain has a statutory obligation to pass on the benefits, and failure to do so will result in penalties.