GST Charcha: Reduction in GST rates on several goods – Anti-Profiteering alert!!!
By: – Bimal jain
Goods and Services Tax – GST
Dated:- 26-7-2018
The recently concluded 28th meeting of GST Council has recommended changes in the GST rates on several goods and brought down the GST rates on number of products bringing as many as 88 products in lower tax slab. This is being seen as a major relief for the consumers and shall provide impetus to the relevant industries. However, lowering of tax rates always brings along with it the fear of profiteering by the Industry and the consumers for whom the taxes are brought down are deprived of these benefits.
Thus, it becomes imperative on the part of the concerned Industry to lower the rates of the goods accordingly and pass on the benefits of lower GST rates to the consumers from 27th July 2018 onwards from when the revised GST rates are going to be applicable. Non-compliance of the same shall attract huge penalties under Anti-P
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consumers.
Provisions of Anti-profiteering measures – Section 171 of the CGST Act, 2017:
In terms of Section 171(1) of the CGST Act, 2017, “Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.”
Apparently, this Section casts responsibility to pass on benefit of GST by supplier to recipient for following two aspects:
* Benefit on account of reduction in effective rate of tax: The benefit of reduced tax rate should be passed on to the consumer in the form of reduced price. For example: The rate of tax on specified goods has reduced to 18% from 28%. This means the supplier of such goods should technically sell said goods having basic price of ₹ 100, for ₹ 118 and not on ₹ 128.
* Benefit of increased availability of input tax credit: Input tax credit is made available to the supplier of goods or services, which was otherwise not available ea
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iances such as food grinders and mixers & food or vegetable juice extractor, shaver, hair clippers etc.
* Storage water heaters and immersion heaters, hair dryers, hand dryers, electric smoothing irons etc
* Televisions upto the size of 68 cm
* Special purpose motor vehicles. e.g., crane lorries, fire fighting vehicle, concrete mixer lorries, spraying lorries
* Works trucks [self-propelled, not fitted with lifting or handling equipment] of the type used in factories, warehouses, dock areas or airports for short transport of goods.
* Trailers and semi-trailers.
* Miscellaneous articles such as scent sprays and similar toilet sprays, powder-puffs and pads for the application of cosmetics or toilet preparations.
B. 28% to 12%
* Fuel Cell Vehicle. Further, Compensation cess shall also be exempted on fuel cell vehicle.
C. 18%12%/5% to Nil:
* Stone/Marble/Wood Deities.
* Rakhi [other than that of precious or semi-precious material of chapter 71]
* Sanitary Napkins.
*
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have been recommended to be brought down for specified handicraft items [as per the definition of handicraft, as approved by the GST council] from, –
18% to 12%:
* Handbags including pouches and purses; jewellery box.
* Wooden frames for painting, photographs, mirrors etc.
* Art ware of cork [including articles of sholapith].
* Stone art ware, stone inlay work.
* Ornamental framed mirrors.
* Glass statues [other than those of crystal].
* Glass art ware [ incl. pots, jars, votive, cask, cake cover, tulip bottle, vase ].
* Art ware of iron.
* Art ware of brass, copper/ copper alloys, electro plated with nickel/silver.
* Aluminium art ware.
* Handcrafted lamps (including panchloga lamp).
* Worked vegetable or mineral carving, articles thereof, articles of wax, of stearin, of natural gums or natural resins or of modelling pastes etc, (including articles of lac, shellac).
* Ganjifa card
12% to 5%:
* Handmade carpets and other handmade textile floor coverings (
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us companies like Hardcastle Restaurants, which runs McDonald's restaurants in west and south India, Lifestyle International, Honda Motor and Hindustan Unilever Ltd. (HUL) dealer alleging violation of anti-profiteering provisions for not reducing the prices of the commodities after the reduction of GST rates. The instance where HUL has been served notices by the DGA for profiteering from the lower tax rates and their benefits not reaching to the consumers appears significant.
To this notice, HUL has responded that it is willing to offer INR 119 crores for the benefits accrued due to lowering of tax rates and the benefit it did not extend to the consumers. The DGA has in turn asked HUL the basis on which they reached the conclusion that they had made the stated unreasonable profit. Though the matter is still pending but it throws some light on the precautious measures that a taxpayer must pay heed to avoid the hefty penalties, which may accrue due to the violation of anti-profiteering
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nnot be taken up in the anti-profiteering measures since it is impractical to calculate a large cross-section of commodities and services and then fixing their upper and lower limits.
Thus, determining whether commensurate reduction has been made or not is an uphill task itself in the absence of any clear-cut guidelines. Nonetheless, going by the general meaning of profiteering, suppliers of goods must not make any undue excessive profits out of GST rate cut.
Recent Legal Jurisprudence on Anti- Profiteering Measure:
* Dinesh Mohan Bhardwaj Vs. Vrandavaneshwree Automotive (P.) Ltd. [ 2018 (4) TMI 1377 – THE NATIONAL ANTI-PROFITEERING AUTHORITY ]
Facts: Applicant had entered into contract with respondent dealer prior to enactment of GST for purchase of a car, for which delivery was taken after implementation of GST. Applicant filed application alleging profiteering against respondent stating that post GST respondent was required to reduce taxes from 51% to 29% but same was not done
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ch was issued on 28-6-2017 on which then applicable Service Tax was charged but on two invoices issued on 27-7-2017 i.e. after coming into force of GST, tax had been charged without excluding erstwhile Excise Duty and, hence, he had been charged tax twice once on pre-GST Excise Duty and subsequently on full value of material used in lift.
Held: There is no substance in the claim made by applicant and, therefore, the Authority accepts the report filed by the Director General of Safeguard u/r 129(6) of the CGST Rules, 2017 and orders dropping of the present proceedings as no violation of the provisions of Section 171 have been established inasmuch as installation of lift had been completed after coming into force of CGST Act, 2017 and applicant was liable to be charged GST at rate which was prevalent on 27-7-2017.
Kumar Gandharv Vs. KRBL Ltd. [ 2018 (5) TMI 760 – NATIONAL ANTI-PROFITEERING AUTHORITY ]
Facts: The Applicant in this case filed an application that the benefit of reduct
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major part of the cost of the product. Therefore, there appears to be no reason for treating the price fixed by respondent as violation of the provisions of the anti-profiteering clause.
Rishi Gupta Vs. Flipkart Internet (P.) Ltd. [ 2018 (7) TMI 1490 – NATIONAL ANTI-PROFITEERING AUTHORITY ]
Facts: The Applicant had ordered a Godrej Interio Almirah through respondent and tax invoice dated 7-11-2017 was issued to him for an amount of ₹ 14,852 by supplier but at time of delivery another invoice dated 29-11-2017 was issued by supplier for an amount of ₹ 14,152 and applicant had alleged that he had paid an amount of ₹ 14,852 to respondent and by not refunding differential amount, respondent was resorting to profiteering which amounted to contravention of provisions of Section 171.
Held: It was held that difference in price was due to different rate of GST on both dates and supplier had charged correct rates of GST which were prevalent at time of placing of order and
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Australia instead of class of products approach.
* Breathing space must be given to the businesses who are affected by the inflation and should be protected from unnecessary crackdowns.
* Qualitative measures should be adopted like consumer awareness programmes, inviting big corporates for their commitment towards anti-profiteering like Australia did by inviting big corporates on board and made them sign 'Public Compliance Commitment (PCC)'.
Cautions for the Taxpayers:
Some of the steps that the entities must follow in case of lowering of tax rates and avoid the unwanted dispute of anti- profiteering are as follows:
* Supplies for the time being may be kept on hold till the time reduced rates are coming in operation to avoid any rate dispute on old and new stocks in the market.
* Price changes must be displayed by the retailers and billing must be done as per the changed prices with new tax rate applicable (as practiced in Australia).
* Necessary advertisements in newspape
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