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. It said that the rebate was on the MRP, which includes all taxes and cess as per Section 2(d) of Consumer Goods Act.
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”.
“The defence of the petitioners that they had charged VAT as per law is of no avail as the issue, viz misleading advertisement resulting in unfair trade practice, is concerned,” the order said. The bench upheld verdicts of district and state forums that any discount falling short of “flat 40%” on the MRP would amount to unfair trade practice. The district forum had directed the shop owners to refund the extra amount to complainants, besides paying compensation, ranging between Rs 2,000 and Rs 5,000, and litigation cost, between Rs 1,000 and Rs 2,500.


The National Consumer Dispute Redressal Commission’s decision to bar shops and franchises to charge VAT on 40% discounted goods is a smart 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.