Dozens of anti-profiteering investigations have been launched into fast food brand Subway franchisees, especially in Maharashtra, by the National Anti-profiteering Authority (NAA) under the GST regime. The NAA orders have put these small businesses in difficulty as they face the prospect of paying hefty fines even if they approach the courts against the authority’s directives.
While businesses have the option of challenging the NAA orders, the high courts have been asking businesses in such cases to deposit a substantial portion of the amount found to be profiteered in NAA’s orders into the Consumer Welfare Fund (CWF).
This is even as several NAA orders against large companies Hardcastle, Hindustan Unilever and Reckitt Benckiser, among others, have been stayed by the HCs.
“In some cases, the profiteered amount is as much as Rs 80 lakh. We can’t afford to deposit half this amount if we file a writ petition in the court against the order,” said a Pune-based franchisee owner on condition of anonymity. He added that it would lead to severe cash flow crunch in businesses of small size.
The NAA had found two Subway franchisees, one each in Rajasthan and Maharashtra, guilty of profiteering earlier this year. This has led to investigations into a wider network of Subway franchisees, a source said. He added that NAA often expanded the scope of probe into multiple items sold by a business found to have profiteered from one item.
The probe into restaurants have revolved around issues of not passing the benefit of GST rate cut in November 2017, when it was brought down to 5% from 18% but without any input tax credit (ITC).
In NAA hearings, restaurants have argued that their costs shot up due to denial of ITC, but many orders have gone against business owners in such cases. Further, NAA also doesn’t consider the argument that prices were reduced more than the corresponding rates on some items while not on others so the net effect was of passing the benefit. It has relied on the stance that price cuts should be uniform on all items in accordance with the rate cut.