GSTAT: 18% Interest on Anti-Profiteering Amounts is Prospective

GSTAT: 18% Interest on Anti-Profiteering Amounts is Prospective

Issue: Whether the provision for imposing 18% interest on amounts determined as profiteered under the Goods and Services Tax (GST) anti-profiteering rules can be applied retrospectively to cases of profiteering that occurred before the effective date of the relevant rule amendment.

Facts:

• The Directorate General of Anti-Profiteering (DGAP) filed a complaint alleging that the Respondent (Procter & Gamble Group) had profiteered by not passing on the benefit of a GST rate reduction on sanitary pads (from 12% to Nil) during the period July 27, 2018 to October 31, 2018.
• The Respondent was willing to deposit the profiteered principal amount (₹6,88,770) but contested the imposition of 18% interest and penalty.
• Rule 133(3)(c) of the CGST Rules, which imposes the 18% interest, was amended by Notification No. 31/2019 dated June 28, 2019, and was later made effective from April 1, 2020, by a subsequent notification.

Decision:

The GST Appellate Tribunal (GSTAT) Delhi upheld the profiteered amount of ₹6,88,770 but ruled that the provision for imposing 18% interest has only prospective operation from its effective date (April 1, 2020). Consequently, no interest or penalty was imposed for the profiteering that occurred in 2018.

Key TakeDowns:

• Prospective Operation: The Tribunal affirmed the principle that tax laws imposing an onerous burden (like interest or penalty) are presumed to be prospective unless the statute clearly states otherwise.
• Interest Date: The 18% interest provision under Rule 133(3)(c) is applicable only to cases arising on or after April 1, 2020. Profiteering that occurred prior to this date is not subject to the 18% interest levy under this specific rule.
• Deposit Requirement: The profiteered amount (principal) must still be deposited into the Consumer Welfare Fund (CWF) as per Section 57 of the CGST Act.
• Judicial Precedent: The ruling relies on the Supreme Court principle against retrospective operation of onerous statutes, confirming that the Revenue must abide by the clear effective dates of its own amending notifications.