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Dominos Pizza fined for not passing GST rate cut benefits to customers
Business Today, February 05, 2019

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.

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