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Wednesday, July 26, 2017

GST (Goods and Service Tax)- Is it really pro-consumer?

GST has been introduced in the country with much fanfare issuing several political statements. One of the statement being heard from the politicians of the ruling party was that all consumers are excited with the implementation of GST. Even the Prime Minister termed it as Good and Sweet Tax. GST is on a basic principle of One Nation One Tax and it has got two elements i.e CGST (Central GST) and SGST (State GST).

Prior to introduction of GST, we have VAT system in country. In my view, there is no basic difference as both are with cascading effect at each point of sale i.e the additional tax on value addition and in both the tax systems, the input tax gets credited to the registered dealer by adjusting with output tax. It simply means if the registered dealer has paid an input tax of Rs. 100/- on a commodity and he sells the commodity to next buyer by charging tax at Rs. 105/-, the dealer has to pay the additional tax of Rs. 5/- only. Such facility was available in both terminology i.e VAT and GST. The only advantage seems to be that the quantum of VAT was differing from State to State and GST is with a uniform tax across the country. However, uniformity also does not seems to have meaning as the States are empowered to increase their component of GST i.e. SGST by 2% and local municipal bodies can also impose additional duties/ levies etc. Number of taxes like Excise duty etc. have been merged in GST. But what about overall amount of taxation? A glaring question is if the GST is really pro-consumer and the Governments are just caring about consumers then why the petroleum products and alcoholic products have been left out from the purview of GST. 

How the consumers are excited with the implementation of GST is possibly not understandable. With the introduction of GST era, the prices of the commodities specially of recurring nature are expected to rise and with the rise in the prices which category of the consumer gets excited is beyond understanding of a common man like me?  It may be true that the prices might have come down for certain items which are purchased once in the life time but what about purchases of recurring nature or of daily use.

Now a days, we middle class people are accustomed to order quite often a restaurant for home delivery of food items. Earlier on home delivery of food items used to be billed with 14% VAT. Now with GST, the tax would be 18%. The net impact is not 4% increase but expected to be more because of our various business models in the country. The example is substantiated with a bill of a restaurant namely Le-Chef at Sector 37 Faridabad on whom the order for 2 veg thallies was placed for home delivery. 


The ready made thaali used to be costing Rs. 142/- on 30th June 2017 and now it is costing at Rs. 190/- i.e a net increase of more than 30% in prices. The restaurant in a bid not to let the diners have feeling of significant impact of GST has offered a discount of 15% and this discount shall be withdrawn sooner or later as it is the general practice in India. The prices of the commodities are increased with an initial discount or some free scheme offer and once the consumer gets accustomed to the increased price, the offers are withdrawn. Psychologically it gives a feeling to the buyers that the prices have not increased so the statistician take advantages of such psychology.  


Friday, July 21, 2017

Issue of service charges being charged by restaurants and hotels

Number of articles have been written on this blog pertaining to charging of service charges by the restaurants. An article titled Are Restaurant and Hotels adapting to unfair business practices? also appeared in this blog on 21/04/2015 the url of which is http://skvirmani-jagograhak.blogspot.in/2015/04/are-restaurant-and-hotels-adapting-to.html

The service charge being charged in the bill by the restaurants and hotels are in one form is like 'Tip". The tip is always considers to be out of its own will whereas the restaurants and hotels are charging compulsorily in the bills and this range from 10% to anywhere around 20% irrespective of whether the service is worth appreciation. While the Gov. of India through Department of Consumer Affairs have issued guidelines for fair business practices, the restaurants are still violating the same guidelines. The guidelines as issued by Department of Consumer Affairs are reproduced below:

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Wednesday, July 19, 2017

Whether IDFC Bank resorting to collection of Deposits in Fastag by adapting to unfair business practices and whether their consumer grievance system meets the aspirations of Consumers?


National Highway Authority of India (NHAI) has come out with a Fastag to enable motorist to cross the toll plaza barriers without stopping at any of the toll plaza. The toll fee as applicable to the particular toll plaza gets automatically deducted from the prepaid balance in the card. Three Banks have been nominated for such fastag cards namely IDFC Bank, State Bank of India (SBI) and ICICI Bank. The main terms of the financial cost in the Tags have been specified by NHAI for the car as:

1. Cost of the Tag           : Rs. 200/-
2. Security Deposit         : Rs. 200/-
3. Minimum balance       : Rs. 100/-

The term Minimum Balance has been specified as
"Minimum Balance is the minimum recharge amount to be done at the time of RFID tag activation"

The plain reading of these costs indicates that the Tag would be costing you Rs. 500/- which will be having Rs. 100/- as minimum balance and the tag would be an active one i.e useable. 
  
Incidentally I had a chance to visit IDFC extension counter at DFD Skyway at Badarpur/Faridabad on 15/06/2017 to purchase a Fast Tag along with monthly rates as applicable to DFD Skyway. The rates as specified by DF Skyway on monthly basis for a car is Rs. 737/- which enables the motorists to cross toll plaza 'n' number of times in a period of one month.
However, while discussing with the counter executive of the IDFC Bank, I had noticed certain arbitrarily terms and condition which neither are transparent nor are logical which suggest for some unethical business practices of the IDFC Bank as explained herein. 
The cost of the tag was being informed as Rs. 500/- which includes ( a copy of the snap was taken at the counter and is pasted here for ready reference):
1. Tag Price              : Rs. 200/-
2. Deposit                 : Rs. 200/-
3. Minimum Balance   : Rs. 100/- 

The monthly charges for the toll usage at DFD Sky way was intimated to me as Rs. 737/- . As far as the things stand here, I had absolutely no issue and requested for the issue of the card with monthly recharge of Rs. 737/- after complying with all requisite documentation. It was also stated that the card is required to be used only at DFD Skyway against a monthly fee of Rs. 737/- as applicable.

The above terms and conditions are perfectly un-disputable. However​, as I was interested in buying the card with a monthly recharge of Rs. 737/-,  I was being told that I have to also recharge for another Rs. 200/- (surprisingly the figure of Rs. 200/- was kept on changing from Rs. 200/- to Re1/- during the course of discussion with the counter executive on 15/06/2017 and next day with their representative). It was rather surprising for such arbitrarily terms and I was being told that the Card with Monthly charge of Rs.737/- without any additional recharge for Rs. 1/- to Rs. 200/- shall remain blocked and it will not work as the terms of the purchase of the tag clearly states that the card with a minimum balance of Rs. 100/- would remain active. It seems that either there is some technology issue or some element of unethical business practices as the consumers are being pressurized for additional recharging and keeping the consumers money with the bank for unethical gains. Why the figure of recharge kept on change from Re1/- to Rs. 200/- is beyond my understanding and the plain thinking would be that IDFC Bank is unauthorized in collecting deposits without paying any interest. It was specifically stated that if the same card is to be used at other toll roads, the card would be recharged in advance before use depending upon the toll charges. But even in this scenario, it was being intimated that card would not get activated even with recharge of Rs. 737/- as monthly fee payable at DFD Skyway.

When the card with a minimum balance of Rs. 100/- is being  purchased and the card is being recharged with monthly fee of Rs. 737/- why the tag remain as blocked is not understood. Why the consumers are being asked to recharge for additional values (in an arbitrarily manner) is not understandable. When the consumers is duly complying with the requirement as published, the blocking of the card unless additionally charged seems to be unethical and requires the necessary intervention for the system correction. 
An email was sent to IDFC Bank stating above points clearly. However, the response as received from IDFC Bank is not less shocking reflecting unprofessionalism, careless attitude towards consumers substantiating my statement of their unethical business practices. The communications from their Bank and my responses are reproduced below:

Response of IDFC Bank dtd. 28/06/2017 (that too after lot of reminders and followup)   to my email dtd. 16/06/2017
"Dear Mr. Virmani,
With reference to your appended email, we wish to inform you that our official has spoken to customer and appraised the concern.
Please feel free to write to us at head.customerservice@idfcbank.com or call us at 1800 419 2332 for any further assistance required on the subject matter. We are available 24 X 7 at your discretion.
We thank you for banking with us and look forward to your continued patronage.
Regards, Hitesh Jethwa , Customer Relations Unit, IDFC Bank"

My response dtd. 30/06/2016 to Head Customer Service in response to their above stated email dtd. 28/06/2017
"Dear Sir,
We are shocked to see the content of the response received from you and such kind of response is not expected from a Bank like yours. 
We have raised an issue of public interest and need point by point response in writing. Merely just saying that the representative has spoken is not sufficient and does not look like a business response. 
We shall appreciate receiving a  better business response clarifying your stand on the stated issues.

With regards "

Email from IDFC Bank dtd. 09/07/2017:

"Dear Mr. Virmani,
Writing to you in continuation to the query you had raised and the subsequent discussions and clarifications given by the Bank’s team regarding the FASTAG pricing.
We would like to clarify again that
(a)    Price of the TAG is INR 200 inclusive of all taxes.
(b)    The Monthly pass amount of INR 737 is fixed by the plaza as per the NHAI guidelines. This amount is paid to the Toll Plaza directly while you purchase the Tag. This means the FASTAG would not carry the balance. Customers are offered FASTAG to experience cash less travel across all NHAI plazas and the FASTAG is issued by multiple banks as per the guidelines issued by RBI. The issuing banks have stipulated the balances to be maintained in each classification of FASTAG. For  instance, if the vehicle is a CAR/JEEP the tag should always have a credit balance of  any amount above INR 100.

The Monthly pass is valid for the respective plaza which has issued the pass and could be used independently of FASTAG. Hence it is not mandatory to link the FASTAG with Monthly passes. Details of linking FASTAG with the monthly passes is given in the NHAI website under the FAQ section.
Trust this clarifies your queries


Regards, Hitesh Jethwa, Customer Relations Unit, IDFC Bank"

My email dtd. 09/07/2017

"Dear Mr. Hitesh,
Thanks for your response. While responding /communicating on the subject, I would request you not to kindly remove any of the mail id listed in my emails. 
While on above issue, it seems your response is still avoiding the main points as brought out  in my email. I have never questioned on the following charges:

1. Tag Price              : Rs. 200/-
2. Deposit                : Rs. 200/-
3. Minimum Balance : Rs. 100/-

The above amounts to Rs. 500/- which is fine up to this point. This is the amount being charged at the time of issue of Fastag. Thus, it already includes a minimum balance of Rs. 100/- as mandated by NHAI. The problem arises when the customer is asked to recharge above this balance to avoid "blacklisting". When the card is having a minimum balance of Rs. 100/-  as above, why the customer is being compelled to charge for another Rs. 200/- (of course this figure kept on changing during the conversation).

As and when there is a minimum balance of Rs. 100/- (which is included in the Rs 500 paid at the time of issue of Fastag) the card should remain active meeting the terms and conditions of NHAI. Your representative told it will get blocked even at Rs. 100/- minimum balance. Now the question is when the card is having a minimum balance of Rs. 100/- and the same is recharged with the monthly amount of Rs. 737/- being the charges at DF Skyway toll plaza it should work. Please confirm categorically whether it will work or not at DF Skyway Toll Plaza under this situation in yes or no form. Please be informed that NHAI condition stipulates the tag to be active with minimum balance of Rs. 100/- 

1. Tag Price of Rs. 200/- + Security deposits of Rs. 200/- plus and minimum balance of Rs. 100/- with the monthly recharge of Rs. 737/-. No additional conditions.  
2. Whether the tag would remain active with a minimum balance of Rs. 100/- or not. (yes or no)
I would request you to kindly bring the matter to its logical conclusion immediately.
Your confirmation be return mail shall be highly appreciated."
However, IDFC Bank has not been able to respond in an explicit manner till the time of writing this post on 19/07/2017 and the logical derivatives could be that the IDFC Bank in an unauthorised manner is collecting the deposits from the consumers and as no interest is payable on such deposits therefore the business operations of IDFC Banks seems to be Unfair Business Practices. The author of the bog has also visited some other public domains and was amazed at their poor communications. In fact one of the public domain has indicated of 8% issues reported by the consumers are being responded by IDFC Bank. 

(A link of this article is being emailed to IDFC Bank for their reference, review and comment if any)

Monday, July 17, 2017

Unfair business practices by major brand retailers like Shopperstop, Myntra, Jabong, Pantaloons, Lifestyle, Anita Dongre, Big Bazar Gen Nxt and others by Charging VAT/ GST on discounted sales


Unfair trade practices by retailers (Shopperstop, Myntra, Jabong, Lifestyle, Anita Dongre, Big Bazar Gen Nxt) and others - Charging VAT/ GST on discounted sales


                            There have been several posts in this blog bringing out details of unfair business being carried out by the retailers. 

                              The first such an article titled Is Ritu Wears adapting to ethical business Practices? probably "No". was published on 09/02/2014 followed by another article titled  Why VAT being charged by Aditya Birla Nuvo on discounted MRP when MRP is inclusive of all taxes? which was published on 10/02/2014. The link to these two articles are:


                            Thereafter I have been working on a drive bringing out such unethical business practices by the retailers using other social media too. The articles were being shared with the stakeholders as a matter of practice including sharing with the concerned retailer.

                                 As it has become a trend wherein the retailers announce the discount on the MRP either on % age basis or on a fixed amount basis and then the consumers are being charged VAT on these discounted prices so arrived at the time of billing either at counters or through online shopping. While some retailers use to charge the additional VAT at the time of billing, some retailers also used to write “VAT Extra” in their display board, advertisements etc. The charging of additional VAT in both the situations is an unfair business practices on a basic fact that the MRP is always inclusive of VAT and other charges under the provisions of MRP rules. Therefore any discounted prices so arrived after discounting on MRP becomes discounted MRP and hence it is inclusive of VAT/ Sales Tax on the proportionate basis.  The industrial behavior in charging the taxes which are not chargeable reflects some dubious activities as most of the business always thinks of how to avoid taxation. The possibility of some vested interest cannot be ruled out.

                               The consumers continued to be deceived by the retailers and such deception is still continuing not only by the small retailers but also by the big brands like Shoppers Stop, Lifestyle, Big Bazar Gen Nxt, Myntra.com, Jabong (ecommerce shopping site) etc.  The only exception seems to be the Ritu Wears against which Govt. of Haryana took an action and imposed fine of Rs. 4,000/- based on my complaint. Ritu Wears have stopped such unfair business practices. I am quoting content of their two SMS recently received as part of their advertisement. 

"Special  SUNDAY  OFFER 
RITU WEAR FARIDABAD
HAPPY HOUR,(10% EXTRA ) FROM 10.30 TO 4 PM
50% OFF  ON ALL MOST ITEMS 
NO GST EXTRA
T & C APPLY"

"RITU WEAR FARIDABAD
RAYMOND'S &F.M BUY-3-50,LEE BUY-2 50US.POLO-BUY-2-40,LEVIS
 FLAT40VAN HEUSEN&LOUIS PHILIPPE BUY-2-40ALLEN SOLLY-B2G2G&J,BUY5-50-NO EXTRA GST"

                      While these retailers have been adapting to unfair business practices, incidentally some of the major retailers also seems to be adapting ethical business practices as Snowhite, have clearly stated in their advertisement dtd. 10/01/2015 that “No Extra Vat” is chargeable on discounted sale prices. Home Saaz does not charge any VAT on discounted prices. 
                     
                            While Aditya Birla attempted to justify their charging of extra VAT, Ritu Wears preferred to get the complaint compounded with Rs. 4,000/- and agreed to stop such practices in future. Interestingly M/s JDS Apparels Limited responded with a document from Retailers Association of India in March 2014 which supported that in case the dealers has displayed or advertised Vat extra, the same can be charged extra. 

                         However, State Commission and National Commission did not agree to such statements made by the retailers during the proceedings as brought out hereinafter.

                     While the issue of such unethical business practices was being taken up with
the appropriate authorities as well social media being aggressively used since March 2014 onwards, National Consumer Disputes Redressal Commission in a Revision Petition No. 3156 of 2016 (against the order dated 25/07/2016 in Appeal No. 948/2015 of the State Commission, Punjab) in its judgment on 9th February 2017 adjudicated with the same view point as brought out in my several posts on this blog. It adjudicated as:

                           “Learned counsel for the petitioner in order to get rid of the aforesaid judgment has submitted the facts of the aforesaid case before Coordinate Bench were different because in the advertisement of the aforesaid case, flat discount of 40% was offered, whereas the words ‘FLAT’ is missing in offer of the petitioner. Merely absence of word ‘FLAT’ in the offer of the petitioner will not make any difference because the discount of 30% on MRP by itself means that discount is ‘FLAT’ discount on maximum retail piece. So far as judgments relied upon by the petitioner concerned, those judgments are not applicable to the facts of the case because those judgments relates to tax matters whereas in the instant case, we have to see whether the petitioner has indulged in unfair trade practice by giving misleading offer to the customers and thereafter overcharging them by charging VAT on discount price.
                                    In view of the discussion above, we do not find any jurisdictional error or
Material irregularity in the impugned order which may call for interference in exercise of revisions jurisdiction. Revision petition is, therefore, dismissed.”

                                    State Commission has earlier stated that “as per established law, on
discounted Maximum Retail Price (MRP), Value Added Tax (VAT) cannot be charged. It was so said by this Commission in the following cases:-
                                                              i.      Shoppers Stop and others Versus Jashan Preet Singh Gill and Others, first Appeal No. 210 of 2015 decided on 01.09.2015.
                                                            ii.      Benetton India Private Limited Vs. Ravinderjit Singh, Appeal N. 61 of 2016 decided on 20.09.2016.
                                                          iii.      M/s Aero Club (Woodland) Vs. Harpreet Singh, Appeal No.318 of 2016 decided on 01.12.2016.
                                                          iv.      Ethinicity Vs. Heema Aggrawal, Appeal No. 331 of 2016 decided on 02.01.2017.”

                           The judgments of the State Commission upheld by National Commission in Revision Petition have explicitly adjudicated that the VAT cannot be charged on the discounted prices. While a specific complaint against Shoppers Stop and others was adjudicated by the State Commission, surprisingly the Shoppers Stop even preferring to continue the same practice as on date. The Shoppers Stop was continuously being reminded through social media about non-applicability of any tax on the discounted sale prices.  A consumer who shopped at Shoppers Stop recently on 25/06/2017 vide Invoice No. 0679 has reported charging of VAT of Rs. 67.83 on two items offered to be sold at 50% and 40% discount respectively. 

                           Some of the other cases which have come to the notice of the author recently in addition to Shoppers Stop are against Myntra.com (an e-commerce site), Jabong, Pantaloon, Lifestyle, Big Bazar Gen Nxt.  The author has already raised complaints with State Controllers of Legal Metrology of Karnataka and Uttar Pradesh. It is worth mentioning that the retailers which earlier used to display "VAT Extra" immediately removed from their display after the judgement of Hon'able National Consumer Disputes Redressal Commission (NCDRC). However such activities after a gap of few weeks/months have restarted the unfair business.
                        
                     (A link of this article is being emailed to the retailers for their reference, review and comment if any)