Shops Cannot Say ‘VAT Extra’ On Items Sold On Discount, Rules Consumer Body

The apex consumer body has ruled that shops can’t charge extra VAT on items sold on discount price, which is rebate on the MRP that includes all taxes and cess.

The National Consumer Disputes Redressal Commission has held that shops selling goods at 40% discount cannot charge VAT or any other duty on the discounted price as the rebate was on MRP, which includes all taxes and cess as per Section 2(d) of Consumer Goods Act, reported The Times of India.

The NCDRC order came last month after state forums had rejected the plea of Woodland franchises in Chandigarh and Delhi that had refused to refund VAT charged to customers on jackets sold at 'flat 40% discount'. The amount in dispute was Rs 119.85, which was the VAT charged on a jacket bought at 40% discount on an MRP of Rs 3,995.

Justice D K Jain, NCDRC president, held that "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 price and, therefore, tantamount to unfair trade practice".

Why do retailers charge extra VAT after discount on MRP was one of the top read posers on Quora.

“It is always optional to keep the discounted prices as exclusive or inclusive of taxes but companies do show discounted prices as exclusive of taxes so that in a way if the company wants to give a discount of 37% then it can show the discount as 40% & then charge VAT as 5%. Showing 40% discount (instead of 37%) clearly tempts the customer to buy goods, said tax expert Rohit Goyal on Quora.