Domino's faces anti-profiteering action for not passing on GST cuts

Pizza chain Domino’s has got caught in the crosshairs of anti-profiteering authorities for not passing on a cut in goods and services tax to consumers. Anti-profiteering provisions make it compulsory for companies to pass on any benefits from a lower GST rate to consumers.

The Directorate General of Anti-Profiteering found that Domino’s had not reduced the prices of all its food products after the GST Council cut the tax rate on restaurants last November, and instead passed on the benefit selectively.

“An investigation report has been issued,” said a government official privy to the development. In India, Jubilant FoodWorks operates Domino’s restaurants under a franchise deal with American chain Domino's Pizza Inc.

AJubilant spokesperson said the company believes it passed on the benefits. “The company has received a copy of the investigation report submitted by the Director General Anti-Profiteering (DG) to the National Anti-Profiteering Authority (NAA). However, JFL believes it has passed on the benefit on account of reduction of GST rates to the customers and accordingly will represent its case before NAA,” the spokesperson said in an email response to ET’s questions.

The GST Council in its November 15, 2017 meeting slashed tax rate for restaurants to 5% from 18%. An investigation by the Directorate General of Anti-profiteering, previously called the Directorate General of Safeguards, found that the chain did not pass tax benefits to all consumers.

The government had created the anti-profiteering framework to shield consumers from any runaway price rise post rollout of GST from July 1 last year. Under the provisions, all complaints at the national level are examined by a standing committee and at the state level by state screening committees consisting of officials.

If a complaint is found to have merit, it is sent to the DG anti-profiteering for an investigation to be completed in three months. The DG then sends the report to National Anti-Profiteering Authority, which issues the order. The DG's investigation report is key to the decision by the authority and an adverse report would impact a company. However, there are no guidelines for businesses on anti-profiteering and it has been left to their wisdom to pass on tax benefit in the manner they deem right.