Goods and Services Tax

IMPLEMENTATION OF ANTI-PROFITEERING LAW IN GST

Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 6-12-2017 – Anti Profiteering, as the name suggests, is a check against profiteering – something which ought to be ethical but is now a legal issue in Goods and Service Tax. Concept of anti-profiteering measure While every business would like to earn more and more profits from business, given an opportunity, it is a fact that GST is a new concept being introduced in India for first time and claimed as a major tax reform and that experience suggests that GST may bring in general inflation in the introductory phase. The Government wants that GST should not lead to general inflation and for this, it becomes necessary to ensure that benefits arising out of GST implementation be transferred to customers so that it may not lead to inflation. For this, anti profiteering measures will help check price rise and also put a legal obligation on businesses to pass on the benefit. This will also help in instilling confidence in citiz

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ax credit to the consumer by way of commensurate reduction in prices. Authority for anti-profiteering regulation The power has been given to Central Government to constitute an authority to oversee whether the commensurate benefit of allowance of input tax credit or reduction in the tax rates have been passed on to the final customer. Section 171(2) of the GST Act provides for establishment of an authority for an anti-profiteering clause in order to ensure that business passes on the benefit of reduced tax incidence on goods or services or both to the consumers. The National Anti-profiteering Authority (NAA) shall be responsible for applying anti-profiteering measures in the event of a reduction in rate of GST on supply of goods or services or, if the benefit of input tax credit is not passed on to the recipients by way of commensurate reduction in prices. The National Anti-profiteering Authority shall be headed by a senior officer of the level of a Secretary to the Government of India

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check any undue increase in prices of products of companies under GST. The NAA will work to check any undue increase in prices of products by taxpayer companies under the GST regime. It will work in a three-tier structure – a Standing Committee on Anti-profiteering as well as State-level Screening Committees. The National Anti-Profiteering Authority would consist of five members, including a Chairman. It will also constitute State-level Screening Committees, which will have one officer of the State Government, to be nominated by the Commissioner, and one officer of the Central Government, to be nominated by the Chief Commissioner. The Additional Director General of Safeguards will be the Secretary to the Authority. Various authorities under GST law for anti-profiteering shall, thus comprise of the following: National Anti-Profiteering Authority, Standing Committee on Anti-Profiteering, and State level Screening Committee. Affected consumers may file an application, in the prescribed f

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nsequent to reduction in rate of tax or allowance of input tax credit. During the two years of initial transition into GST regime, Anti-Profiteering Authority (APA) will step in and may ask businesses that have not passed on full benefits of reduced tax burden to consumers to make up for such benefit, with interest. National Anti-Profiteering Authority (NAA) shall act as a monitoring and regulatory authority to curb anti-profiteering practices of tax payers under GST regime. The NAA shall have powers to: Make company reduce the prices. Make company refund the money to the consumer alongwith interest @ 18% p.a. Order company to deposit the refund amount in the Consumer Welfare Fund (in case the buyer is not identifiable). Impose monetary penalty equivalent to amount involved in undue profiteering. Cancel registration of the assessee. However, such action would be based on the recommendations of the Directorate General of Safeguards. Also such powers would be used in extreme cases. Order

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10 November, 2017, GST Council decided to lower the GST rates of about 200 items in different categories. In 178 cases, it was lowered from 28% to 18% including FMCG items. With this, there are now only 50 items in 28% bracket (w.e.f. 15 November, 2017). The National Anti-Profiteering Authority is an assurance to consumers. If any consumer feels the benefit of tax rate cuts is not being passed on, he can complain to the authority. The body is mandated to ensure that the benefits of GST rate reduction is passed on to consumers. The five-member anti-profiteering authority will have power to ask those not passing on the tax benefit to return the undue profit earned to consumers along with an 18% interest, reduce prices and if the consumer is not identifiable, deposit the amount in a Consumer Welfare Fund. In yet another move, CBEC has issued an advisory to major consumer product manufacturers to ensure that price reduction should take place wherever rates have been lowered so that benefi

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which has been possible with the use of technology to monitor billing / invoicing at retail level. Similarly, restaurants are also expected to pass on the benefit because of lower tax rate of 5% in place of 18% or 18% with input tax credit. Government had to take this step as restaurants were not passing on the benefit and there were complaints of undue profiteering. Lowering the rate also makes things simple for businesses as well as consumers. Though there is a legal provision in the GST law itself to take action against of undue profiteering, Government has taken various steps to ensure action on the part of manufacturers and suppliers so that the benefit is passed on to ultimate beneficiaries, i.e., the consumers. Even on existing stocks lying unsold, there is going to be revised prices put by way of stickers or otherwise. Since old and new (revised) prices would be displayed, a comparison thereof will show the benefit passed on due to lower tax cascading. One of the measures to cu

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