Tata Group firms Starbucks Coffee and Infinity Retail have been fined Rs 1.04 crore and Rs 1.9 crore respectively by the National Anti-Profiteering Authority (NAA) for having profiteered by allegedly not passing on the GST rate cut benefits to consumers. Starbucks Coffee operates in India through a 50:50 joint venture with Tata Group, while Infinity retail is Tata Group’s retail arm that operates Croma stores.
India’s profiteering watchdog has found Tata Starbucks guilty of not passing on the benefit of reduced goods and services tax (GST) rates to consumers to the tune of Rs 1.04 crore and escaping penalty.
The coffee chain has to deposit the amount within three months with 18% interest from the day the profiteered amounts were collected from consumers, NAA said in its order, reviewed by ABP News.
The company had hiked the base price of a specific coffee product after the GST Council cut tax rates on restaurant services from 18% to 5% with effect from November 15, 2017, thus keeping the product’s retail sale price (pre- and post-GST rate reduction) unchanged.
NAA estimated the company’s quantum of profiteering based on an investigation by the Director-General of Anti-Profiteering for the period from November 15, 2017, to June 30, 2018, an order posted on the website of the NAA showed.
When asked for comments, a Tata Starbucks spokesperson in an email reply to an ABP news query said, “As a responsible business, Tata Starbucks will comply with the ruling. Tata Starbucks intends to explore our legal options on the basis of our belief that we have followed the law in accordance with the revision of the GST structure. “
In a separate matter, Tata Group’s consumer durables, and electronics retail arm, Infinity Retail, was fined Rs 1.9 crore for alleged GST profiteering from the sale of cameras and power banks after the new tax regime for electronic goods was reduced in 2019.
The NAA’s penalty on Infiniti comprised the profiteered amount from selling cameras worth Rs 1.41 crore and the sale of power banks worth Rs 49.8 lakh.
Infinity Retail operates the consumer durables and electronics retail business under the Croma brand has also been asked to reduce the prices of the products — power banks and DSLR cameras.
It may be recalled that the GST Council had reduced the tax rate on these items from 28% to 18% from January 1, 2019. The investigation covered the six months from January 1, 2019.
An email sent to Infinity Retail seeking comments remained unanswered till the time of publishing.
AS per GST laws, businesses are required to pass on the benefit of the tax rate cut to consumers immediately after the tax rate comes down. However, companies tend to increase the product’s base price to keep the retail sale price unchanged and, in the process, make more profits.