The anti-profiteering authority has dismissed a complaint filed against a franchisee of Subway restaurant, saying the increase in base price of its products was commensurate with removal of input tax credit (ITC) benefits. The GST Council had lowered the tax rates on restaurants to 5 per cent, without ITC, effective November 15. The tax rate was 18 per cent earlier, but the companies could claim credit on taxes paid on the inputs.
In its order, the National Anti Profiteering Authority (NAA) said NP Foods, a franchisee of Subway India, had increased the base price of products to make good the loss which had occurred due to denial of ITC post GST rate reduction.
The applicant had filed a complaint stating that the base price of its product ‘Hara Bhara Kabab’ was raised from Rs 130 to Rs 145 with effect from November 15, 2017.
NP Foods had increased the average base price by 12.14 per cent to neutralise the denial of ITC of 11.80 per cent and such increase is commensurate with the increase in the cost of the product on account of denial of ITC, the NAA said.
“Therefore, the allegation of not passing on the benefit of rate reduction is not established against the respondent (NP Foods),” it added.
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