Anti-profiteering rule under GST

Sourabh Jain

With the introduction of GST there will be easy credit flow mechanism, input tax benefits and reduced tax rates on supply of some goods or services. This is what the prima facie picture looks like but the intent of the government is to pass on the benefit of the same to the ultimate consumer. So if you are benefited by GST you have to pass on the benefit by reduction in prices. Anti-profiteering was a major concern for the industry from the beginning of GST as now the Anti-profiteering rules have been released by the government lets have further clarity on the same

Administrative structure under Anti-profiteering rule

Authority:

National Anti-profiteering authority

Consists 1 Chairman & 4 Technical members

Standing Committee:

Constituted by council, have members as nominated by

Central government and state government

Screening Committee:

To be constituted for each state by state government

Consists 1 State government officer & 1 central government officer

Secretary to the authority:

Additional director general of safeguards

 Authority:

The authority has power to determine the whether the reduction in rate of tax on the supply of goods or services or the benefit of input tax credit has been passed on by the registered person to the recipient by way of commensurate reduction in prices.

The authority has further powers-

• To determine whether the reduction in tax rates and input tax benefit has been passed on to the recipient accordingly by way of reduction in prices
• To identify the registered person who has not passed on the benefit to the recipient by way of reduction in prices
• Authority can order to –
  • To reduce the prices
  • To refund the benefit amount to the recipient along with the interest @18%
  • Impose penalty
  • Cancel the registration

Application and proceedings for anti – profiteering

1) On receipt of Application by standing committee by

• Interested party (Receiver or supplier of goods or services)
• Commissioner
• Any other person

Along with the prima facie evidences that the benefit has not been passed by way of reduction in prices

However, if the application is from interested party (Receiver or supplier of goods or services) having the issues of local nature first shall be examined by state level committee, if it is satisfied then it shall be forwarded to standing committee

2) If the standing committee is satisfied that there is prima facie evidence that the supplier has not passed on the benefit, it shall refer the matter to Director General of safeguards.

3) The Director General of safeguards shall carry on the investigation and collect evidence whether the Benefit has been passed on to the recipient by way of reduction in price or not.

4) The Director General of safeguards shall give a report of its investigation findings to the authority within 3 months (further extension of not more than 3 months)

5) Authority on receipt of report from the Director General of safeguards shall determine whether the registered person has passed on the benefit of reduction in tax rates or the benefit of input tax credit to the recipient by way of reduction in price or not The interesting thing to note here is that the principle of natural justice has been modified, opportunity of being heard will only be given if you request the authority in writing

6) Authority can exercise any of the powers, it can order to reduce the prices, to refund to recipient, impose penalty or cancel registration.

Authority will be constituted for 2 years, unless council recommends otherwise

Some major areas of concerns of anti-profiteering rules are as follows-

• Application can be made by interested party, commissioner or any other person So any other person whosoever may apply to the committee, and if it is prima facie evidences are available the proceedings may be initiated
• The Director General of safeguards will carry investigation and collect evidence So it can be hypothecated to what level of depth the investing officer can go, as they have the power to investigate
• The Director General of safeguards can share evidence from one interested party to other interested party , they can take help of other agencies also
• The proceeding shall be judicial proceedings and the order passed by the authority need to be complied immediately otherwise it will lead to recovery proceedings

If a registered person is clutched in any of the proceedings under anti profiteering then it can be a very intense blow to the business. So it is better to keep the records ready along with the implementation of GST that what all benefit has been achieved due to reduction in rate of taxes on goods or services or input tax benefit and the same has been passed on further.