Goods and Services Tax – GST – By: – Bimal jain – 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-Profiteering provisions. This GST Charcha aims to bring to the fore the necessity of compliance
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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 earlier, is termed as benefit in the hands of supplier, that must be passed on to the consumer in the form of red
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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. Coir pith compost. Sal Leaves siali leaves and their products and Sabai Rope. Phool Bhari Jhadoo [Raw material for Jhadoo] Khali dona. Circulation and commemorative coins sold by Securit
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s, 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 (including namda/gabba). Handmade lace. Hand-woven tapestries. Hand-made braids and ornamental trimming in the piece. Toran. I. Miscellaneous Change relating to valuation of a supply: IGST @5% on Pool Issue Price (PIP) of Urea imported on Govt. account for direct agriculture use, instead of assessable value plus
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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 provisions. Consequences of non- compliances of Anti-Profiteering measure: If the DGA adjudicates that an entity has violated the anti-profiteering provisions, then, it may order to reduce the price of the commodity, return the excessive amount collected along with an interest of eighteen percent, or it may impose a hefty penalty or worst cas
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ral 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. Held: It was held that benefit of reduction in the tax rate was passed on to the applicant by way of reduction in the price of the car. Benefit of ₹ 10,550/- on account of reduction of tax by about 2% viz. from 31.254% (pre-GST) to 29% (post GST) has already been passed on to the applicant and the amount of ₹ 10,550/- is inclusive of the ITC. Th
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e 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 reduction in rate of tax on India Gate Basmati Rice' had not been passed on to the consumers as its maximum retail price had been increased since implementation of GST w.e.f. 01.07.2017 and hence margin of profit had also been increased by respondent. Held: India Gate Basmati Rice sold by respondent was not liable for tax before implementation of GST and after coming into
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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 supply of Almirah through two invoices and, therefore, no illegality had been done by supplier while executing order placed by applicant and allegation of violation of provisions of Section 171 was not established. Comments and Conclusion: There is no doubt that the government in all its earnestness is trying to deal with the profiteering during this phase. Following proactive st
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em 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 newspapers of national and regional/local languages must be given to create awareness amongst consumers as regards reduction in rates and corresponding changes in pricing of goods. Keep necessary back up documentation and working handy as to the computation of cost pre-reduction and post-reduction of GST rates. Keep track of market trends and implications thereof on prices of goods, if any. Prices of major raw materials, inp
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