GSTAT Orders IRCTC To Deposit ₹50.41 Crore For Failing To Pass On GST Benefit On Rail Neer

The GST Appellate Tribunal (GSTAT) at Delhi has held that Indian Railway Catering and Tourism Corporation Limited (IRCTC) failed to pass on the benefit of a reduction in tax rates on Rail Neer packaged drinking water after GST was introduced in 2017.

The tribunal found that although the Railway Board fixed the maximum retail price (MRP), IRCTC had the discretion to determine the transfer price at which it supplied the product to railway licensees and contractors.

A special bench comprising Judicial Member Justice Mayank Kumar Jain and Technical Member Anil Kumar Gupta established profiteering of ₹50.41 crore for the period from July 1, 2017, to May 31, 2020, upholding the findings of the Directorate General of Anti-Profiteering (DGAP).

“During investigation it was found on the basis of documents submitted by the IRCTC, that it had never reduced its basic prices commensurately after 01.07.2017. This act of the Respondent clearly falls under the ambit of Section 171 of the CGST Act, 2017,” the tribunal observed.

The proceedings arose from allegations that IRCTC had failed to pass on the benefit of the reduction in tax incidence on Rail Neer after GST came into force on July 1, 2017. Before GST, the tax incidence was alleged to be 25%, comprising 12.5% central excise duty and 12.5% VAT. GST was introduced at 18% for Rail Neer.

The tribunal later noted that the overall pre-GST tax incidence, including surcharge where applicable, was around 28.75%.

The Railway Board had fixed the MRP of a one-litre bottle of Rail Neer at ₹15 through Commercial Circular No. 72/2012 dated November 22, 2012. The MRP remained unchanged after GST was introduced.

IRCTC argued that it could not be held responsible for failing to reduce the MRP because the Ministry of Railways controlled the retail price. It also contended that it did not directly sell the bottles to passengers, with retail sales generally handled by railway licensees, sub-licensees and contractors.

As a public sector undertaking mandated to provide drinking water at subsidised rates, IRCTC argued that reducing the transfer price would merely affect the revenue shared between the company and the Railways without changing the price paid by passengers.

The tribunal rejected this argument, relying on Railway Board Circular No. 49 of 2008, which authorised IRCTC to fix the transfer price of Rail Neer supplied to departmental and licensee-operated units.

It held that IRCTC was required to reduce the transfer price commensurately with the reduction in the tax rate, even though it had no authority to change the MRP. The tribunal noted that the DGAP had calculated the profiteered amount using the transfer price and not the MRP.

The tribunal also rejected IRCTC's argument that its public-sector status and the subsidised nature of Rail Neer placed its supplies outside the anti-profiteering provisions. It held that Section 171 of the Central Goods and Services Tax Act, 2017, does not create an exception for government entities or subsidised supplies.

Rail Neer supplied free of charge to passengers on Rajdhani, Shatabdi, Duronto and other premium trains was also included in the profiteering calculation. The tribunal observed that the cost of the bottles was included in the fares collected from passengers.

The DGAP calculated the profiteered amount by comparing the average base price during the pre-GST period, from April 1 to June 30, 2017, with prices reflected in invoices for supplies made between July 1, 2017, and May 31, 2020.

The tribunal concluded that IRCTC had failed to pass on the benefit arising from the introduction of GST and the availability of increased input tax credit.

“Accordingly, profiteering amounting to Rs. 50,41,44,461/- stands established against the Respondent,” the tribunal ruled, holding that IRCTC had contravened Section 171 of the CGST Act.

The tribunal directed IRCTC to deposit ₹50.41 crore in the Central and State Consumer Welfare Funds, divided equally between them in accordance with the state-wise allocation in the DGAP report. The amount must be deposited within one month of the October 14, 2026, order.

IRCTC must also pay interest at 18% from June 28, 2019, until the date of deposit. The tribunal imposed a penalty of 10% of the profiteered amount.

However, IRCTC will not be liable to pay the penalty if it deposits the entire profiteered amount along with interest within 30 days of the order.

For Appellant: Ajay Kumar Tehlan, Authorised Representative for the DGAP

For Respondent: Adarsh Ramanujan, Advocate, assisted by Parth Singh, Advocate