The Directorate General of Safeguards (DGS) has served a notice to Jubilant FoodWorks under the GST anti-profiteering rules for allegedly not passing on tax cut benefit to consumers of its Domino’s Pizza. Last year in November, the GST Council had slashed the tax rates for all restaurants, except the ones located within hotels with room tariffs of Rs 7,500 and above, from 18 per cent to 5 per cent.
However, the standing committee received complaints from two consumers who alleged that Domino’s Pizza was still over-charging and not passing on the benefit of tax cut.
As part of its investigation, DGS had earlier asked the company to submit any document it wanted to in order to defend its case. In its defence, the company had to give price list of pre and post GST reduction by Domino’s Pizza in November, 2017.
Jubilant FoodWorks Company Spokesperson confirmed the notice and said: “…the Company believes that it has passed on the benefit on account of reduction of GST rates to the customers and accordingly will represent its case before National Anti-Profiteering Authority.”
Jubilant isn’t the only food company to get GST notice. Last year in December, DGS served notices to Hardcastle Restaurant – a master franchisee of McDonald’s. The authority also sent notices to Lifestyle International and Honda dealer. In January this year, DGS served notice to FMCG giant Hindustan Unilever for not passing on the benefit of tax rate cut from 28 per cent to 18 per cent.
As per the structure of the anti-profiteering mechanism in the GST regime, complaints of local nature are first sent to the state-level screening committee while those of national level are marked for the standing committee. If the complaints have merit, the respective committees would then refer the cases for further investigation to the DGS. The DGS generally take about three months to complete the investigation and send the report to the anti-profiteering authority.
If the authority finds that a company has not passed on GST benefits, it either directs the entity to pass on the benefits to consumers or if the beneficiary cannot be identified, it asks the company to transfer the amount to the ‘consumer welfare fund’ within a specified timeline. The authority has the power to cancel registration of any entity or business if it fails to pass on to consumers the benefit of lower taxes.
Till February this year, the standing committee had received 354 complaints alleging that the benefits of tax cut or input tax credit were not passed on to the consumers.