ANTI PROFITEERING MEASURES IN GST
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 21-4-2017
The GST law contains a unique provision on anti-profiteering measure as a deterrent for trade and industry to enjoy unjust enrichment in terms of profit arising out of implementation of Goods and Services Tax in India, i.e., anti-profiteering measure would obligate the businesses to pass on the cost benefit arising out of GST implementation to their customers.
The provisions are contained in the GST law as per following provisions:
CGST Act, 2017
Section 171 on Anti-profiteering measures
IGST Act, 2017
Section 20 which stipulate that provisions of CGST Act, 2017 shall apply mutatis mutandis to IGST Act
UTGST Act, 2017
Section 21 which stipulate that provisions of CGST Act, 2017 shall apply mutatis mutandis to UTGST Act
SGST Act, 2017
Section 171 on Anti-profiteering measures
Statutory Provisions
Anti-Profiteering Measure (Section 171)
The following is
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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 citizens.
Analysis of Anti-Profiteering Measure
This is a new concept being tried out for the first time. The intention is to make it sure that whatever tax benefits are allowed, the benefit of that reaches to the ultimate customers and is not pocketed by trade.
The power has been given to Central Government to constitute an authority to oversee whether
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e following monitoring functions :
* Input tax credit availed by taxpayer have actually resulted in commensurate reduction in price of goods / services
* The reduction in prices on account of reduction in tax rates have actually resulted in a commensurate reduction in price of goods / services.
Anti profiteering Measures Abroad
Global experience suggest that anti-profiteering provisions are only effective if there is a significant lead-in time to allow the relevant authority to educate consumers and businesses as to their respective rights and obligations. The concept of anti- profiteering provision has been perhaps borrowed from Australia which was the first country to enact similar provisions when it replaced a series of inefficient taxes with a GST in July, 2000. The Australian Competition and Consumer Commission (ACCC) was charged with the responsibility of monitoring prices 12 months before the commencement of GST. The ACCC's focus was on educating consumers and businesses.
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read with the Price Control and Anti-Profiteering (Mechanism to Determine Unreasonably High Profit) (Net Profit Margin) Regulations, 2014. Countries like Canada and New Zealand have also similar provisions.
Implementation of Provision
It is expected that there will be rules or guidelines for implementation of this provision in relation to who will implement this provision, constitution and business rules for authority to monitor, possible cost audit monitoring, from when this provision will be implemented and how authority will check and implement. Also, penalties, to be deterrent will also have to be determined in interest of customers as well as businesses. It will also have to be ensured that there is no hardship, harassment or undue interference by the Authority. At the same time, businesses are expected to be fair and reasonable as otherwise, market forces would lead to fair price determination in absence of any cartelization or unfair trade practice.
To conclude, it can be sa
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