ANTI PROFITEERING PROVISIONS AND AUTHORITY IN GST (PART-1)

[Dr. Sanjiv Agarwal]

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

The Rules for Anti Profiteering are contained in Chapter XV (Rule Nos. 122 to 137) of the Central Goods and Services Tax Rules, 2017.

Objective of Anti-Profiteering Measure

Section 171 provides that it is mandatory to pass on the benefit due to reduction in rate of tax or from input tax credit to the consumer by way of commensurate reduction in prices.

Analysis of Anti-Profiteering Clause

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 the commensurate benefit of allowance of input tax credit or  reduction in the tax rates have been passed on to the final customer.

Sub- section (2) of section 171 of the 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 authority constituted by Central Government will have powers to impose a penalty in case it finds that the price being charged has not been reduced consequent 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.

Functions of Anti-Profiteering Authority (APA)

The Authority under section 171 of the GST law shall have the following monitoring functions :

1. Input tax credit availed by taxpayer have actually resulted in commensurate reduction in price of goods / services
2. The reduction in prices on account of reduction in tax rates have actually resulted in a commensurate reduction in price of goods / services.

Authority for Checking Anti-Profiteering Activities

 The Government has notified anti-profiteering authority (APA) which will check any undue increase in prices of products of companies under GST. The APA 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.

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.

Salient features of Anti-Profiteering Authority (APA)

• To be  set up under Anti-Profiteering Rules, 2017
• Does not cover State of J&K
• Investigation by Director General of Safeguards
• To determine methodology & procedure
• Cooperation with other agencies (income tax, police, revenue intelligence etc)
• Power to summon
• Order monitoring by IGST / SGST / CGST authority
• Tenure of 2 years.

Duties of APA

As per Rule 127, APA shall be duty bound to :

• to determine whether any reduction in rate of tax on any supply of goods or services or the benefit of the input tax credit has been passed on to the recipient by way of commensurate reduction in prices.
• to identify the registered person who has not passed on the benefit of reduction in rate of tax on supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices.
• to pass an appropriate order.

The powers to take action are also listed as duties whereby it can order price reduction, refund of profit, recovery, penalty or even cancellation of GST registration.

Duties of Various Authorities

State Level Screening Committee

• Screening of applications to verify that supplier has not passed on the tax benefit
• Pass on relevant cases to the Standing  Committee for further enquiry

Standing Committee

• Receiving of written application
• Examining evidence of non-passing of benefit
• Refer cases to Director General of Safeguards (DGS)

Director General of Safeguards

• Carry out investigation within 3 months
• Evidence collection
• Issuing notices / summons

In the three-tier structure for monitoring anti- profiteering, the GST implementation committee, including four officers each from the Centre and states and one officer from the GST Council, will first receive the complaints.

The GST Implementation Committee (GIC) will receive complaints and those which are state specific and involving smaller amounts will be transferred to the state screening committee.

Other cases will be referred to the Directorate General of Safeguards who will finish investigation within 3 months and send the findings to the anti-profiteering authority, which will pass an order in another 3-months time.

The small cases, which are confined to one state specifically, will be referred to the state level Screening Committee.

(To be concluded.....)