The anti-profiteering authority is set to fine coffee chain Starbucks for not reducing prices of its products after the Goods and Services Tax rate cut. The tax authorities had questioned Starbucks about its prices and had issued two sets of letters seeking data after GST was reduced. Starbucks shared data of its prices and costs in a detailed reply to the National Antiprofiteering Authority (NAA), people aware of the matter said.Seattle-based Starbucks, the world’s biggest coffee retailer, operates over 100 stores in India through Tata Starbucks, its joint venture with the Tata Group.
An email sent to the official spokesperson of Tata Starbucks did not elicit any response. GST for restaurants, first set at 18%, was reduced to 5% in early 2018, although they could no longer claim input tax credits. This meant taxes paid on raw materials could not be set off against future tax liabilities. Starbucks had argued that the denial of input tax credits had neutralised the cut in GST and thus its operational costs were not impacted. However, the NAA poked holes in Starbucks’ defence and is close to slapping afine on the company. The NAA order against Starbucks is expected in the next few weeks, a person aware of the matter said.