KSFE Pulled Up by Consumer Forum for Unauthorised GST Deduction in Chit Fund Transaction; Refund and Compensation Ordered
Pranav B Prem
The District Consumer Disputes Redressal Commission, Kollam, Kerala, comprising Smt. S.K. Sreela (President) and Sri. Stanly Harold (Member), has allowed a complaint filed by a subscriber against Kerala State Financial Enterprises Ltd. (KSFE), Anandavalleswaram Branch, Kollam, for the unauthorized collection of ₹1,836 as GST from the prize money of a chit fund. The Commission found that the collection was unsupported by law, amounted to deficiency in service and unfair trade practice, and directed refund with interest and compensation.
Brief Facts
The complainant, a practicing lawyer in Kollam, had subscribed to Chit No. 138/2020/A/I with a sala of ₹2,00,000 conducted by the opposite party KSFE, a government-owned NBFC. Upon being declared the successful bidder in July 2022, the complainant instructed KSFE to deposit the net chit prize amount in a term deposit scheme with the company, with interest to be adjusted toward future chit installments. The net entitlement after deducting the auction discount and foreman’s commission stood at ₹1,81,900. However, KSFE credited only ₹1,79,864 to the complainant’s account, after deducting ₹200 as writing charges and ₹1,836 towards GST. The complainant alleged that the GST deduction was unauthorized and in violation of the Chit Funds Act and applicable GST laws. The complaint sought a refund of ₹1,836 with 18% interest from 05.08.2022, ₹1,00,000 as compensation for mental agony and inconvenience, ₹1,00,000 for unfair trade practice and deficiency in service, and cost of proceedings.
Stand of the Opposite Party
KSFE denied the allegations and asserted that the ₹1,836 was statutory GST collected in accordance with Notification No. 11/2017-Central Tax (Rate) under Heading 9971, which mandates 6% GST on the services rendered by a chit fund foreman. KSFE argued that tax-related matters fall outside the Consumer Commission’s jurisdiction and should be addressed before GST authorities. It further submitted that the complaint was not maintainable and that GST is an indirect tax which may be passed on to the consumer.
Commission’s Observations and Findings
The Commission framed four key points for determination, including the legality of the ₹1,836 collection and whether it constituted deficiency in service or unfair trade practice.
It was observed that KSFE had deducted ₹10,000 as foreman’s commission, and the GST liability, if any, was applicable on that commission and payable by the service provider (the foreman), not the consumer (the subscriber). The complainant produced the voucher (Exhibit P1) showing the ₹1,836 GST deduction, while the opposite party failed to produce any documentary evidence, such as GST registration, remittance records, or statutory authority justifying the deduction from the chittal.
The Commission noted that mere reference to a GST notification without substantiating how it applies to the chittal does not justify such a deduction. It held that the Chit Funds Act and the GST framework do not permit recovery of GST from subscribers, and doing so without express statutory backing constitutes an unfair trade practice.
It further observed that: “The opposite parties had the opportunity to adduce evidence but failed to do so… Collection from consumers without explanation or statutory authority amounts to unfair trade practice.” The Commission commended the complainant, a legal professional, for diligently raising the issue and described the case as an example of how members of the legal fraternity can contribute to consumer rights and awareness.
Final Reliefs Granted
The Consumer Commission allowed the complaint and issued the following directions:
KSFE shall refund ₹1,836 to the complainant with 9% interest per annum from 05.08.2022 till the date of payment.
KSFE shall pay ₹1,00,000 as compensation for mental agony and for engaging in unfair trade practice and deficiency in service.
KSFE shall also pay ₹10,000 as cost of litigation.
If the directions are not complied with within 30 days from receipt of the order, all amounts shall carry 9% interest per annum from the date of the order until realization.
The order was pronounced on 28th May 2025.
Appearance
For Complainant: Adv.P.Babukuttan Pillai
For Opposite Parties: Adv.T.Ajeesh
Cause Title: N.R. Roy V. The Kerala State Financial Enterprises Ltd. & Anr.
Case No: C.C. No. 308/ 2022
Coram: Smt. S.K. Sreela [President], Sri. Stanly Harold [Member]
[Read/Download order]
