GST Anti-Profiteering: Tribunal Clarifies Limitation, Interest and Penalty in DG Anti Profiteering Vs A J Enterprises

Background of the Dispute

The matter in DG Anti Profiteering Vs A J Enterprises (GSTAT) arose from an investigation carried out by the Director General of Anti-Profiteering (DGAP) under Section 171 of the CGST Act 2017, read with Rule 129(6) of the CGST Rules 2017. The core allegation was that the Respondent, a franchisee operating a “Subway” restaurant outlet in Pune, did not pass on to its customers the benefit of reduction in GST rate on restaurant services from 18% to 5% (without ITC) with effect from 15.11.2017, as notified by Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017.

The Respondent, M/s A.J. Enterprises, was running a Subway outlet at Amanora Mall, Pune, under a standard franchise agreement with M/s Subway Systems India Pvt. Ltd. (Subway India).

An application alleging profiteering was first examined by the Maharashtra State Level Screening Committee, which found a prima facie case that the Respondent had not passed on the commensurate benefit of the tax rate cut. The application was then referred to the Standing Committee on Anti-Profiteering, which in turn referred the matter to the DGAP for investigation under Rule 129(1).

DGAP’s Investigation and Initial Findings

First Investigation Report (20.08.2020)

After issuing notice to the Respondent and examining submissions and data, the DGAP submitted an initial report dated 20.08.2020, concluding that:

  • The Respondent had contravened Section 171 of the CGST Act.
  • The profiteered amount for the relevant period was computed at ₹15,66,821.
  • The allegation was that base prices were raised to neutralise the impact of the rate reduction from 18% to 5%, thereby denying customers the benefit of the tax cut.

This report was placed before the National Anti-Profiteering Authority (NAPA) for consideration.

NAPA’s Interim Order and Remand (13.04.2022)

NAPA, on examining the report, passed an interim order dated 13.04.2022 under Rule 133(4) of the CGST Rules, remanding the matter back to the DGAP. NAPA flagged, among other issues:

  • Discrepancies in per‑unit sale prices used for calculating the profiteered amount.
  • Inclusion of period beyond the scope of the initial notice.

DGAP was directed to re-investigate and to re-compute the profiteered amount for a corrected period.

Re‑Investigation and Revised DGAP Report

Fresh DGAP Report (14.10.2022)

Pursuant to NAPA’s directions, the DGAP conducted further analysis and issued a fresh report dated 14.10.2022. In this report:

  • The investigation period was reset to 15.11.2017 to 30.09.2019.
  • The profiteered amount was recomputed at ₹2,13,32,322.
  • The DGAP concluded that:
    • The Respondent increased the base prices of menu items from 15.11.2017 onwards.
    • The increase in base prices outweighed or neutralised the benefit of the GST rate cut from 18% to 5%.
    • The benefit mandated under Section 171 was not passed on to recipients.

The Director General relied on transaction-wise sales data, product-wise prices and segregation of pre-rate and post-rate reduction periods to reach this computation.

Jurisdiction of GST Appellate Tribunal

With effect from 01.10.2024, vide Notification No. 18/2024-Central Tax dated 30.09.2024, the Principal Bench of the GST Appellate Tribunal (GSTAT), constituted under Section 109(3) of the CGST Act 2017, was empowered to adjudicate Anti-Profiteering matters. The present case thus came up before the GSTAT.

The Tribunal issued notice to the Respondent, inviting written submissions on the DGAP’s report dated 14.10.2022. The Respondent filed detailed submissions on 16.10.2025, contesting both the findings and the computation of profiteering.

Respondent’s Commercial Structure and Cost Claims

Nature of Business and Commercial Terms

The Respondent explained that, due to commercial difficulties, the Subway outlet in Amanora Mall has since been closed. It was operating under these key commercial terms with Subway India and online aggregators:

  • Royalty: 8% of base price on sales, payable to Subway India.
  • Advertisement Contribution: 4.5% of base price, payable to Subway India.
  • Lease Rent: 9%–10% of monthly revenue (on base price), with a minimum guarantee, payable as per agreement.
  • CAM Charges: Fixed common area maintenance of ₹41,914 per month.
  • Online Aggregator Commissions: Average commission of 22.7% per transaction to platforms like Swiggy, Zomato, Uber Eats and Food Panda, including platform fee, delivery charges and other allied amounts.

According to the Respondent, menu prices were revised periodically to address input cost increases, market conditions and franchise-level guidance from Subway India.