CA Keshav Garg, Chandigarh
The 10th GST Council Meeting which concluded on 18.02.2017 at Udaipur has approved the anti-profiteering Measure as illustrated by section 163 of the Revised Draft of Goods and Services Tax Law. But what it is exactly here we illustrate for you:
1. What is the provision in the law?
Section 163 provides that the Central Government may by law constitute an Authority, or entrust an existing Authority constituted under any law, to examine whether input tax credits availed by any registered taxable person or the reduction in the price in account of any reduction in the tax rate have actually resulted in a commensurate reduction in the price of the said goods and/or services supplied by him.
2. What is the implication of the Anti-profiteering measures?
The provision clearly indicates that in case a business/registered taxable person avails any benefit under GST due to availment of extra tax credit or due to reduction in tax rate, such benefit has to be passed on to the consumer. For instance a dealer who buys excise paid goods from the manufacturer does not get credit of the excise duty when he sells his goods under VAT. Under GST such credit shall be available leading to saving at the hands of such dealer.
The Act proposes that such savings cannot be retained by the business units rather they shall pass it to the consumer.
3. What if a business unit trading in goods which were earlier taxed at 12.5% and post GST they are going to be taxed at say 5%, do they need to reduce the price of my products?
Yes, the clause also provides that where the business unit is saving due to reduction in the tax rates, it has to compulsorily reduce the price of their products to the extent of such reduction. This will result in same profit margins pre-gst and post-gst leading to cheaper goods availability with the consumers.
4. Does this mean that whatever a business unit saves from the tax part has to be passed on?
No, the law does not make it mandatory that exact savings has to be passed on but it says commensurate to the reduction of the tax rates. If there are any other cost which the business might have to incur post gst the same shall be adjusted when new prices have to be calculated.
5. Does the clause of Anti-profiteering apply on all CGST, SGST and IGST?
No, the provision of section 163 is applicable only in respect of tax administered by the Centre Government i.e. CGST and IGST. Hence the anti-profiteering clause is not applicable on the State GST.
6. Is Section 163 applicable only for transitional period?
No, The provisions of the section 163 has been deliberately kept out of the Chapter covering Transitional Provisions which means that every time there is a reduction in the tax rates or any benefit is derived by the business unit, the same has to be passed on to the consumer.
(Author can be reached at +91 9888-090-008 or on mail-Mygst.mytax@gmail.com)
Author Bio
Unless government made costing mechanism mandatory and transparent under GST, compliance to anti-profiteering clause is not possible. ref my article on Tax Guru..
https://taxguru.in/income-tax/cost-accounting-economy-can-better-gst.html