Shops Can’t Charge Extra VAT On Items Sold On Discount: NCDRC

The National Consumer Disputes Redressal Commission recently ruled that shops cannot charge extra VAT on items sold on discounted price, observing that the MRP on the product includes all taxes, and hence it was not open for the trader to impose VAT again on the discounted price . The question to be considered by the Commission was whether the Petitioners had indulged in unfair trade practice by charging VAT on the discounted merchandise, despite having announced a discount of “ FLAT* 40%” on selected merchandise, which in actual terms works out to less than 40% of the MRP. Answering the question in positive, the Bench observed, “ In our opinion, the advertisement in the above form is nothing but an allurement to gullible Consumers to buy the advertised merchandise at a cheaper bargain price, which itself was not intended to be the real “ bargaining power” and, therefore, amounts to unfair trade practice, as found by both the Fora below.” . Relying on Section 2(d) of the Consumer Goods (Mandatory Printing of Cost of Production and Maximum Retail Price) Act, 2014, the Commission held that the rebate was on the MRP, which included all taxes and cess. It thereby upheld the order of the District Forum, which had directed the Petitioner to refund to the Complainant an amount of Rs. 119.85 illegally charged as VAT, besides paying Rs. 5,000 as compensation for mental agony and harassment, and Rs. 2,000 as litigation costs.

The National Consumer Dispute Redressal Commission's decision to bar shops and franchises to charge VAT on 40% discounted goods is a reasonable decision and will come as relief to consumers. These entities mislead customers into purchasing items, thinking that it is a wonderful offer to buy these items at a reduced price, whereas in reality they end up paying almost the same amount if not more.