VAT On Discount Goods

Awareness

No Need To Pay Value Added Tax (VAT) On The Products Sold At Discount Rate: Consumer’s Body

The Logical Indian

February 9th, 2017

SHARES

Source: TOI  taxscan Representational Image: fashalot

The apex consumer body, National Consumer Disputes Redressal Commission (NCDRC) has ruled that the shops cannot charge extra VAT on items sold at discount prices.

The consumer body held that shops selling goods at a discount cannot charge VAT or any other duty on the discounted price as the rebate is on the Maximum Retail Price and it already includes all the taxes and cess, as mentioned in Section 2(d) of the Consumer Goods Act.

This order came last month after the state forums rejected the plea of Woodland Franchises in Delhi and Chandigarh that had refused to pay back the VAT charged to customers on jackets which were sold at ‘flat 40% discount’.

On 26 January 2016, the complainant purchased a men’s jacket from the outlet of the petitioner. The MRP on the sticker was Rs 3,995. After deducting 40% discount on this price, an additional 5% VAT was levied on this final price. That is, instead of charging Rs 2,397 after the discount, the customer was charged Rs 2,517. This means that the discount was less than the ‘flat 40%’ that they claimed.

His complaint was rejected by the petitioner (company) because of the terms and conditions of sale as VAT was charged extra as per the instruction of the company.

Having had realised that he was being duped into adopting the unfair practice, the complainant filed a complaint in the District Forum.

The bench headed by Justice DK Jain and M Shreesha observed that advertising as ‘flat 40% discount’ is misleading to the customers telling them that the merchandise is available at a lower price, but this is not the final bargain price. This is tantamount to unfair trade practice.

The complete case can be read here.

The Logical Indian welcomes this judgement as it is in the interest of the customers. We hope that this will help end misleading discount claims.

 

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