A Brief note on Anti-Profiteering Clause

[Prasanna Cp]

Anti-profiteering rules are as result of lessons learnt from inflation and increased price that was witnessed after GST implementation in other countries, Hence it makes more important for the Indian Administrators to keep track on the prices after implementation of GST.

The section which empowers the Anti-Profiteering measures is reproduced as follows:

Section 171 of CGST Act: “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.”

The Central Government, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

Duties of the Authority

Powers of the Authority

to determine whether any reduction in the rate of tax on any supply of goods or services or the benefit of 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 the 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 order: reduction in prices return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen per cent. from the date of collection of the higher amount till the date of the return of such amount. or recovery of the amount not returned in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Consumer Welfare Fund. Imposition of penalty. Cancellation of registration.

Government seems to push hard with this Clause to ensure the end consumers are benefited and business entity need to prepare itself and pass on the benefits and ensure steady flow of value chain

Manufacturers need to ensure that the profits earned are not due to tax arbitrage, but either as a cost plus amount or as function of prevailing market prices.

Anti-profiteering Authority is a three-tier system.

(1) State Level Screening committe.

(2) Standing committe.

(3) Director general of safeguards.

All applications from interested parties on issues of local nature shall first be examined by the State Level Screening Committee Upon being satisfied that supplier contravened the provisions, forward the application with its recommendations to the Standing Committee for further action.

The Standing Committee shall, within a period of two months from the date of the receipt of a written application, examine the accuracy and adequacy of the evidence provided in the application and it shall refer the matter to the Director General of Safeguards for a detailed investigation.   

The Director General of Safeguards shall complete the investigation within a period of three months (extended up to another three months) of the receipt of the reference from the Standing Committee, furnish to the Authority, a report of its findings along with the relevant records.