Extract of Clause 171 of Central Goods and Services Tax Bill, 2017
171.(1) 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.
(2) The Central Government may, 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.
(3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed.
Clause 171 of CGST Bill 2017 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.
While the objective may sound simple, implementing an anti-profiteering clause is fraught with grave risks.The Biggest Challenge will that government will have to ask for pre- and post-GST cost sheet of each product and calculate the pre-GST tax rate and post-GST tax rate for each and every item to understand the quantum of tax benefit that a supplier should get.
In My Personal View even if this might be just for transition (if it is like that assumingly) this defeats the complete mechanism of GST which is supposedly Destination based Consumption tax i.e. The Final Consumer is to bear the complete GST of the Value Chain. Inflation if rises was always expected and further the inflation aspect gets covered by multiple tax rate slabs wherein essential commodities will suffer less or no rate of GST.
About the Author: CA Ankit Gulgulia (Jain)
Author is Practicing Chartered Accountant in New Delhi/NCR and specialising in Indirect Taxes, Corporate Laws and Transfer Pricing. He can be reached at firstname.lastname@example.org or at +91-9811653975