SUPREME COURT OF THE RUSSIAN FEDERATION SUPPORTED FAS POSITION

The relevant letter of the Authority (1) is recognized legal and consistent to the Procurement Law (2)

The state-owned company tried to challenge the legality of this letter from FAS Russia. In its view, it was within its rights to establish such a procedure for evaluating the bids of procurement participants who are on different taxation systems, in which their price proposals will be evaluated based on their reduction to a single basis.

At the same time, VAT is actually deducted from the price offer of the participant applying the general taxation system. It leads to an artificial reduction in the price offered by the participant. As a result, such a counterparty is recognized by the customer as more preferable.

However, based on the literal interpretation of the provisions of the Procurement Law (3), the procedure for evaluating applications should apply equally to all participants.

The FAS Russia notes that customers – state-owned companies are guided by the principles of the Procurement Law. These include equality, fairness, non-discrimination and unreasonable restrictions on competition in relation to procurement participants.

According to the Authority, such actions of state-owned companies initially put entrepreneurs who lawfully apply various taxation systems in an unequal position. It leads to discrimination and creation of preferential conditions for participants in the general taxation system.

The Supreme Court sided with the FAS and confirmed the legitimacy of the Authority`s position.

(1) Letter of the FAS Russia of August 22, 2018 No. АД/66562/18 “On the issue of establishing requirements for participants applying various taxation systems (reduction or increase of the proposed maximum initial price for the amount of VAT)”

(2) Federal Law of July 18, 2011 No. 223-FZ “On Procurement of Goods, Works, Services by Individual Types of Legal Entities”

(3) Part 6 of the Article 3 of the Procurement Law