Bharti Telemedia Under Scanner Over GST Profiteering

Bharti Telemedia, a subsidiary of Bharti Airtel that offers direct to home (DTH) satellite and digital television, is facing anti-profiteering proceedings over prices of its services under the Goods and Services Tax (GST) regime, a person privy to the development said. The National Anti-Profiteering Authority (NAA), which is hearing the case, is soon likely to come out with its verdict in the case.

The investigation against Bharti Telemedia started on a customer complaint that alleged that the firm did not reduce the prices of its services after implementation of the GST, denying consumers the benefit of the reduced tax rate. While the overall tax burden came down in the new tax regime, consumers continued to pay the same tax rate on the DTH services, as per the complaint. The tax incidence, which earlier ranged between 25% and 40%, came down to 18% after GST kicked in. However, the benefit of the reduction in the tax rate was not passed on to consumers, according to the complainant.

On the other hand, the company is believed to have told the anti-profiteering authority that the tax burden, on the contrary, increased from 15% to 18% on account of service tax for the company under the GST regime, but it did not hike the price of its services. The total tax paid by the company in the pre-GST era included 15% service tax and 10%-25% entertainment tax, which varied from state to state. The entertainment tax got subsumed with the GST in July 2017.

The Issue

  • The tax incidence, which earlier ranged between 25% and 40%, came down to 18% after GST kicked in
  • However, the benefit of the reduction in the tax rate was not passed on to consumers, according to the complainant

According to the rule 171 of Central GST (CGST), 2017, any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit (ITC) shall be passed on to the recipient by way of commensurate reduction in prices.

“The anti-profiteering provision of the Central GST (CGST) Act applies only to the GST rate cuts decided by the GST Council from time to time. It is not applicable in this case as the Council hasn’t reduced the GST rate on DTH services,” another person privy to the development said while quoting the investigation report of the Director General of Anti-Profiteering (DGAP).

“We have not received any such notice in the recent past and are unable to comment on the same. Needless to say, Airtel sets a high bar when it comes to corporate governance and compliance,” said an Airtel spokesperson in an e-mail response to the DNA Money’s query.

If the anti-profiteering watchdog finds Bharti Telemedia guilty of profiteering, it can ask the company to reduce prices from retrospective effect, return the due amount to the customer, impose a penalty or in extreme cases may even cancel the firm’s registration. In the event the customers cannot be identified, the NAA can also ask the erring company to deposit the amount to Consumer Welfare Fund (CWF) of the government.

The hearing at NAA is in its last leg and is likely to be concluded soon. The NAA is the apex anti-profiteering body set up to protect consumer interest with DGAP as investigation arm and complaints mechanism via several state-level Screening Committees and a National Standing Committee.

The state screening committees after collecting prima facie evidence send the report to the national standing committee. The national-level committee then refers the case to the DGAP for investigation. DGAP has to submit its report within three months (extendable by another three months) to the NAA, which comes up with the final order within another three months.―DNA India

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