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Starbucks fined Rs 1.4 crore for profiteering, told to reduce prices

The National Anti-Profiteering Authority has directed Starbucks to deposit the amount with 18 percent interest within three months to central and state consumer welfare funds.

November 05, 2020 / 01:02 PM IST

Starbucks has been fined Rs 1.04 crore for not passing goods and services tax (GST) cut benefits to customers. The National Anti-Profiteering Authority (NAA) has ordered Starbucks Coffee Company to deposit the amount with 18 percent interest to central and state consumer welfare funds.

NAA said that the quantum of profiteering was estimated based on an investigation by the Director-General of Anti-Profiteering for the November 15, 2017-June 30, 2018 period.

It also directed Starbucks to "reduce the prices of products so that the benefits of tax reduction is passed on to the recipients".

The probe was conducted on a complaint filed by a consumer alleging that the company did not reduce the price after the GST rate on restaurant services was reduced from 18 percent to 5 percent from November 15, 2017.

According to the complaint, the coffee chain increased the price of its 'short cappuccino' from Rs 155 to Rs 170, when the GST rate reduction came into effect.

The NAA order said the company "increased the base prices of food items and applied 5 percent GST thereon, either maintaining the pre-rate reduction selling prices or even increasing them and this profiteering."

NAA said that benefit of tax rate reduction was not passed on to consumers as the company raised the pre-rate reduction base prices to nullify the GST rate cut.

"The respondent has thus defeated the objective of both the central and state governments to provide the benefit of rate reduction to ordinary consumers by sacrificing their tax revenue," NAA said in its order.

The company has to deposit the amount within three months with 18 percent interest from the day the profiteered amounts were collected from consumers, NAA said.

Tata group has said that the company will comply with the order. "As a responsible business, Tata Starbucks will comply with the ruling. Tata Starbucks intends to explore our legal options on the basis of our belief that we have followed the law in accordance with the revision of the GST structure," LiveMint quoted a spokesperson for Tata Starbucks as saying.

Tata Starbucks is a 50:50 joint venture between Tata Consumer Products and Starbucks Corporation that operates Starbucks Coffee outlets in India.

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first published: Nov 5, 2020 01:02 pm