Last Updated on 13 August 2025 by BIZNAMA NEWS
Posted on .R Suryamurthy
The Goods and Services Tax Appellate Tribunal (GSTAT) has ruled against a Pune-based Subway franchisee, Urban Essence, for profiteering by failing to pass on the benefits of a GST rate reduction on restaurant services.
The tribunal upheld the findings of the Director General of Anti-Profiteering (DGAP) and ordered the outlet to return ₹5,45,005, along with 18% interest, to the Consumer Welfare Funds of the Centre and Maharashtra within three months.
The case dates back to a 2019 complaint alleging that despite the GST rate for restaurant services being reduced from 18% to 5% on November 15, 2017, the outlet raised its base prices, effectively nullifying the benefit for customers. The DGAP’s probe—covering November 2017 to October 2019—calculated excess collections at ₹5,47,005 and found additional GST had also been charged on the inflated prices, breaching Section 171 of the CGST Act.
Urban Essence argued that operational costs such as salaries, rent, and utilities justified the price hikes and claimed the investigation should have been limited to a single menu item mentioned in the complaint. It also said the calculations ignored potential input tax credit. However, the tribunal dismissed these defences, noting the absence of documentary proof and affirming DGAP’s authority to examine all menu items.
Tribunal president Dr. Sanjaya Kumar Mishra highlighted that the law presumes tax reductions must lead to proportionate price cuts unless the seller can prove legitimate cost pressures. “In this case, the respondent has not produced any documents or evidence to rebut such a presumption,” the order stated.
While confirming the violation, the tribunal did not impose penalties since the relevant penalty provision came into effect in 2020, after the profiteering period. CGST/SGST commissioners must ensure compliance within four months, failing which recovery proceedings will begin.
Rajat Mohan, Senior Partner at AMRG & Associates, noted this is the first final order from GSTAT’s Anti-Profiteering Division, with the President personally conducting hearings. “It signals a more structured enforcement approach under Section 171, making it clear that GST rate cut benefits must be passed on directly to consumers and supported by strong documentation, or face decisive action,” Mohan said.