Ahmedabad: The Gujarat high court has said that only the ‘Veggie Supreme’ of Pizza Hut can be a matter of investigation in an anti-profiteering case. Pizza Hut has been fighting a legal battle after a customer accused its SG Road outlet of overcharging though GST rates had been slashed. On Wednesday, the Gujarat HC directed the anti-profiteering authority of the GST department to focus its scrutiny only on the pizza ordered by the aggrieved customer. The case dates back to December 2017 when the SG Road branch of Pizza Hut delivered the Veggie Supreme pizza, serving an online order. The customer was charged Rs 545. The customer lodged a complaint with the anti-profiteering authority claiming that the same product had been sold for Rs 490 on November 2017.
The complainant said that a higher rate was charged for the pizza though on November 15, 2017, GST rates had been reduced from 18% to 5% on food items from restaurants. In October 2019, the director general of the anti-profiteering authority began to investigate if the outlet had withheld the benefit of reduced taxes from customers.
The company that manages the outlets of Pizza Hut and KFC — Sapphire Foods India — contended that GST cuts had come with the denial of Input Tax Credit (ITC) paid on inward supplies. GST paid on inward supplies is a cost falling on restaurants, the company said. It said that due to the denial of ITC, the cost of outward supplies had increased, necessitating a rise in the prices of food items. As against the estimated 11.48% cost of ITC based on the previous year’s financials, Sapphire had increased prices on average by 10.5%. Thus, there was no case of undue profiteering by the restaurant, the company argued.
However, Sapphire continued to receive summons. The company then moved the Bombay high court in May 2020 and upon instructions submitted its reply by June 8. Still, it received another summon seeking information. This brought the company before the Gujarat HC in the last week of June. Senior advocate Deven Parikh represented the company and raised questions on the methodology of the investigation. He also challenged the authority of the director general to investigate products other than Veggie Supreme under Section 171 of the GST Act and 126 of GST rules. The Gujarat HC on Wednesday issued notices to authorities concerned and sought a reply by July 30.
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