Free Goods or Extra Quantity Not a Valid GST Benefit Pass-Through | HC

Case Details: Sharma Trading Company vs. Union of India - [2025] 179 taxmann.com 2 (Delhi)

Judiciary and Counsel Details

• Pratibha M. Singh & Shail Jain, JJ.
• Vipul Agrawal, Nodal Counsel for the Petitioner
• Kumar Visalaksh, Arihant Tater, Ajitesh Dayal Singh, Saurabh Dugar, Kushagra Kumar, Amit Rana, Ms. Upasn Vashisth, Advs., Ripudaman Bhardwaj, CGSC & Ruchesh Sinha, SSC for the Respondent

Facts of the Case

The distributor was a stockist of various products of Hindustan Unilever Limited (HUL). One of the products was Vaseline VTM 400 ML. It is a matter of common knowledge that the GST Regime came into effect from 01-07-2017. Initially, the GST payable on the product was 28%. However, the rate was reduced to 18% w.e.f. 14-11-2017.A complaint was filed against the distributor, alleging that he continued to charge the same amount despite the reduction in the rate of GST. The matter was referred to the Standing Committee on Anti-Profiteering, which in turn referred the matter to the Director-General of Anti-Profiteering (DGAP) for investigation. DGAP submitted the investigation report to the Authority, wherein it was stated that the distributor had profiteered by not passing on the benefit of reduction in GST rates to the consumers. The Authority directed the distributor to deposit the profiteered amount along with interest in the Consumer Welfare Fund and also ordered to recover the profiteered amount from the recipients of the goods. The distributor filed a writ petition before the Delhi High Court to challenge the said order.

High Court Held

The Delhi High Court held that the distributor had increased the base price of the product when the GST rate was reduced from 28% to 18%. Thus, the benefit of reduction in the GST rate was not passed on to the consumers. Such an act of the distributor was against the provisions of Section 171 of the Central Goods and Services Tax Act, 2017. The Court further held that the rationale behind the reduction in GST rates is to ensure that the consumer gets the benefit of the said reduction. A deadline, once fixed by way of notifications, cannot be sought to be violated merely on the ground that some special scheme is being launched or the product is being sought to be given free with some other product or the grammage or the quantity of the product is being increased. The term MRP means ‘Maximum Retail Price’ and thus sale below the said price is permissible. It is only sale above the said price which is impermissible. But to ensure that the GST benefit is not passed on, 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. Such an approach would defeat the entire purpose of reduction of GST rates and the same cannot be permitted.

List of Cases Reviewed

• Reckitt Benckiser India (P.) Ltd. v. UOI [2024] 158 taxmann.com 675/102 GST 495/82 GSTL 344 (Delhi) /W.P.(C)7743/2019 (para 20) followed
• Pawan Sharma vs. Sharma Trading Company [2018] 97 taxmann.com 157 (NAA)/[2018] 70 GST 156 (NAA)/[2018] 19 GSTL 497 (NAA) (para 30) affirmed

List of Cases Referred to

• Reckitt Benckiser India (P.) Ltd. v. UOI [2024] 158 taxmann.com 675/102 GST 495/82 GSTL 344 (Delhi) (para 4).