The Delhi High Court has said that whenever the GST Council reduces the tax rates on a product, the ultimate benefit must flow directly to consumers through a corresponding reduction in the product’s price, according to a report by LiveLaw. A division bench of Justices Prathiba M Singh and Shail Jain emphasized that manufacturers cannot bypass this mandate by altering the product’s quantity while continuing to charge the same MRP.
“The benefits extended to the consumer are also of utmost importance. The purpose of reduction in GST is to make products and services more cost effective for the consumers. The said purpose would be defeated if the price is kept the same and some unknown quantity is increased in the product, even without the consumer requesting for the increased quantity product,” the Court observed, as per the report.
The earlier ruling had categorically clarified that “the legislative mandate is that reduction of the tax rate or the benefit of Input Tax Credit must not only be reflected in reduction of prices but it must also reach the recipient of the goods or services. Such a mandate cannot be tampered with by the supplier by substituting the benefit in the form of reduction of actual price with any other form such as increase in volume or weight or by supply of additional or free material or festival discount like ‘Diwali Dhamaka’ or cross-subsidisation…the requirement that the benefit of the rate reduction and Input Tax Credit reach the final consumer by way of ‘cash in hand’ through commensurate reduction in prices…”
The bench was categorical in describing the practice of increasing product quantity without price reduction as deceptive. “Increasing the quantity of the product unknowingly and charging the same MRP is nothing but deception. The consumer’s choice is being curtailed. The non-reduction of price cannot be sought to be justified on the ground that the quantity has been increased or that there was some scheme which justifies the increase in price. In the opinion of this Court, such an approach would defeat the entire purpose of reduction of GST rates and the same cannot be permitted.”
Source: The Hindu
