Starbucks has been fined Rs 1.04 crore by the National Anti-Profiteering Authority (NAA) for not passing on good and services tax cut benefits on to consumers. The coffee chain has been ordered by the NAA to deposit the amount with 18 per cent interest to central and state consumer welfare funds.
The order was passed after a consumer alleged that the company did not reduce the price after the GST rate cut. GST was slashed on restaurant services from 18 per cent to 5 per cent. The complainant said that Starbucks increased the price of its 'short cappuccino' from Rs 155 to Rs 170 when GST rate cut came into effect.
NAA said that the quantum was estimated after an investigation by the Director-General of Anti-Profiteering. Starbucks has also been asked to "reduce the prices of products so that the benefits of tax reduction are passed on to the recipients". The NAA said in its order that the company increased the base prices of food and then applied 5 per cent GST, and hence, maintained pre-rate cut prices or even increasing the rates in some cases, which qualifies for profiteering.
"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.
Starbucks would need to deposit the amount within three months along with 18 per cent interest from the day the profiteered amounts were collected, said the NAA.
Tata Group said that it would comply with the ruling as a responsible business. Tata Starbucks is a joint venture between Tata Consumer Products and Starbucks Corporation.