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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)      

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