Anti-profiteering measures have been incorporated under GST law to provide benefit of reduction in GST rates to the consumers in terms of reduced prices and not allow more profit margins to the businessmen. The suppliers of goods and services must pass on any reduction in the rate of tax or the benefit of input tax credit to consumers by way of commensurate reduction in prices
Page Contents
- 1. Statutory laws of anti-profiteering:
- 2. Protection for Consumer’s interest:
- 3. Relevant Extract of Section 171 of CGST Act, 2017
- 4. Constitution of the Anti-Profiteering Authority:-
- 5. Constitution of the Standing Committee and Screening Committees.-
- 6. Appointment of Chairman, salary, allowances and Members of Anti-Profiteering Authority:
- 7. Tenure of Anti-Profiteering Authority:
- 8. Secretary to the Anti-Profiteering Authority:
- 9. Structure of the Anti-Profiteering Authority:
- 10. Application to the Anti-Profiteering Authority:
- 11. Anti-Profiteering Application Form (APAF-1):
- 12. Power to determine the methodology and procedure:-
- 13. Duties of the Anti-Profiteering Authority:-
- 14. Examination of Application:
- 15. Initiation and Conduct of Proceedings:-
- 16. Confidentiality of information:-
- 17. Co-operation with other agencies or statutory authorities:
- 18. Proceeding of the Director General of Anti-profiteering:
- 19. Order of the Anti-Profiteering Authority:
- 20. Decision to be taken by the majority.-
- 21. Compliance by the registered person:
- 22. Monitoring of the order:
- 23. National Anti-profiteering Authority:
- 24. Compensation to recipient:
- 25. Tenure of the Anti-Profiteering Authority:
- 26. Important decision of NAA:
1. Statutory laws of anti-profiteering:
Section 171 of the CGST Act, 2017 and Rules 123 to 137 of the CGST Rules deals with the provision of anti-profiteering authority under GST law and the said authority is headed by National Anti-profiteering Authority.
2. Protection for Consumer’s interest:
Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit to consumers by way of commensurate reduction in prices of the said goods or services, if this is not done, the consumer’s interest is protected by the National Anti-profiteering Authority which may order:
(a) reduction in prices;
(b) return of the amount not passed on which interest @ 18% to the recipient;
(c) imposition of penalty; and
(c) cancellation of registration of the supplier.
3. Relevant Extract of Section 171 of CGST Act, 2017
Section 171 of the CGST Act, 2017 prescribes Anti-profiteering measure. The relevant portion of Goods and Services Tax Act, 2017 is reproduced as under:
“171. Anti-profiteering Measure : –
(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 recommendation 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 said 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.”
(3A) Where the Authority referred to in sub-section 2, after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to 10% of the amount so profiteered.
Provided that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority.
4. Constitution of the Anti-Profiteering Authority:-
Rule 122 of the CGST Rules prescribes the authority shall consist of,-
(a) a Chairman who holds or has held a post equivalent in rank to a Secretary to the Government of India; and
(b) four Technical Members who are or have been Commissioners of State tax or central tax for at least one year or have held an equivalent post under the existing law, to be nominated by the Council.
5. Constitution of the Standing Committee and Screening Committees.-
Rule 123 of the CGST Rules prescribes the Standing Committee and Screening Committees,-
(1) The Council may constitute a Standing Committee on Anti-profiteering which shall consist of such officers of the State Government and Central Government as may be nominated by it.
(2) A State level Screening Committee shall be constituted in each State by the State Governments which shall consist of-
(a) one officer of the State Government, to be nominated by the Commissioner, and
(b) one officer of the Central Government, to be nominated by the Chief Commissioner.
6. Appointment of Chairman, salary, allowances and Members of Anti-Profiteering Authority:
Rule 124 of the CGST Rules prescribes the appointment of the Chairman and Members of the authority, the Chairman and Members of the Authority shall be appointed by the Central Government on the recommendations of a Selection Committee to be constituted for the purpose by the Council.
The Chairman shall be paid a monthly salary of Rs.2,25,000 (fixed) and other allowances and benefits as are admissible to a Central Government officer holding posts carrying the same pay:
Provided that where a retired officer is selected as a Chairman, he shall be paid a monthly salary of Rs. 2,25,000 reduced by the amount of pension.
The Technical Member shall be paid a monthly salary and other allowances and benefits as are admissible to him when holding an equivalent Group ‘A’ post in the Government of India: Provided that where a retired officer is selected as a Technical Member, he shall be paid a monthly salary equal to his last drawn salary reduced by the amount of pension in accordance with the recommendations of the Seventh Pay Commission, as accepted by the Central Government
7. Tenure of Anti-Profiteering Authority:
The Chairman shall hold office for a term of two years from the date on which he enters upon his office, or until he attains the age of sixty- five years, whichever is earlier and shall be eligible for reappointment: Provided that a person shall not be selected as the Chairman, if he has attained the age of sixty-two years.
Provided further that the Central Government with the approval of the Chairperson of the Council may terminate the appointment of the Chairman at any time.
The Technical Member of the Authority shall hold office for a term of two years from the date on which he enters upon his office, or until he attains the age of sixty-five years, whichever is earlier and shall be eligible for reappointment: Provided that a person shall not be selected as a Technical Member if he has attained the age of sixty-two years.
Provided further that the Central Government with the approval of the Chairperson of the Council may terminate the appointment of the Technical Member at any time.
8. Secretary to the Anti-Profiteering Authority:
Rule 125 of the CGST Rules prescribes that an officer not below the rank of Additional Commissioner (working in the Directorate General of Anti-profiteering) shall be the Secretary to the Authority.
9. Structure of the Anti-Profiteering Authority:
There are 3-tier structure for the investigation and adjudication of the complaints regarding profiteering.
1. State-level Screening Committees and Standing Committee
2. Directorate General of Anti-profiteering; and
3. National Anti-profiteering Authority;
10. Application to the Anti-Profiteering Authority:
Affected consumers may file an application, in the prescribed format, before the Standing Committee on Anti-profiteering if the profiteering has all-India character or before the State Screening Committees if the profiteering is of local nature. The State Screening Committee/Standing Committee will confirm prima facie evidence of profiteering, Director General of Anti-profiteering for investigating profiteering and National Anti-profiteering for determining profiteering and passing appropriate order to ensure consumers benefit from reduced prices.
11. Anti-Profiteering Application Form (APAF-1):
C.B.I & C, has prescribed the simplified application form for anti-profiteering and affected consumers can file their grievance using Form APAF-1 and application shall be filled up only using Block letters. If the applicant wants to keep his name and details confidential have to specify in the application. The application Form requires general information about the applicant, general information about the Supplier who has not passed on the benefit, particulars of Goods and Services and details of reduction in Tax Rate / Benefit of Input Tax Credit (ITC). The filled up application form has to be sent to the State level Screening Committee in case issue is of local nature and in other cases to the Standing Committee.
12. Power to determine the methodology and procedure:-
Rule 126 of the CGST Rules, prescribes that the Authority may determine the methodology and procedure for determination as to whether the reduction in the 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.
13. Duties of the Anti-Profiteering Authority:-
Rule 127 of the CGST Rules, prescribes that the duty of the Authority as follows;-
(i) 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;
ii) 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;
(iii) to order,
(a) reduction in prices;
(b) 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 percent. 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, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Fund referred to in section 57;
(c) imposition of penalty as specified in the Act; and
(d) cancellation of registration under the Act.
(iv) to furnish a performance report to the Council by the tenth day of the close of each quarter.
14. Examination of Application:
Rule 128 of the CGST Rules prescribes the examination of application by the Standing Committee and Screening Committee.-
(1) The Standing Committee shall, within a period of two months from the date of the receipt of a written application [or within such extended period not exceeding a further period of one month for reasons to be recorded in writing as may be allowed by the Authority, in such form and manner as may be specified by it, from an interested party or from a Commissioner or any other person, examine the accuracy and adequacy of the evidence provided in the application to determine whether there is prima-facie evidence to support the claim of the applicant that the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has not been passed on to the recipient by way of commensurate reduction in prices.
(2) All applications from interested parties on issues of local nature [or those forwarded by the Standing Committee shall first be examined by the State level Screening Committee and the Screening Committee shall, [within two months from the date of receipt of a written application, or within such extended period not exceeding a further period of one month for reasons to be recorded in writing as may be allowed by the Authority, upon being satisfied that the supplier has contravened the provisions of section 171, forward the application with its recommendations to the Standing Committee for further action.
15. Initiation and Conduct of Proceedings:-
Rule 129 of the CGST Rules, prescribes the initiation and conduct of proceedings;-
(1) Where the Standing Committee is satisfied that there is a prima-facie evidence to show that the supplier has not passed on the benefit of reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, it shall refer the matter to the Director General of Anti-profiteering for a detailed investigation.
(2) The Director General of Anti-profiteering shall conduct investigation and collect evidence necessary to determine whether the benefit of 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.
(3) The Director General of Anti-profiteering shall, before initiation of the investigation, issue a notice to the interested parties containing, inter alia, information on the following, namely:-
(a) the description of the goods or services in respect of which the proceedings have been initiated;
(b) summary of the statement of facts on which the allegations are based; and (c) the time limit allowed to the interested parties and other persons who may have information related to the proceedings for furnishing their reply.
(4) The Director General of Anti-profiteering may also issue notices to such other persons as deemed fit for a fair enquiry into the matter.
(5) The Director General of Anti-profiteering shall make available the evidence presented to it by one interested party to the other interested parties, participating in the proceedings.
(6) The Director General of Anti-profiteering shall complete the investigation within a period of six months of the receipt of the reference from the Standing Committee or within such extended period not exceeding a further period of three months for reasons to be recorded in writing as may be allowed by the Authority and, upon completion of the investigation, furnish to the Authority, a report of its findings along with the relevant records.
16. Confidentiality of information:-
Rule 130 of the CGST Rules prescribes the provision of confidentiality of information,-
(1) Notwithstanding anything contained in sub-rules (3) and (5) of rule 129 and sub-rule (2) of rule 133, the provisions of section 11 of the Right to Information Act, 2005 (22 of 2005), shall apply mutatis mutandis to the disclosure of any information which is provided on a confidential basis.
(2) The Director General of Anti-profiteering may require the parties providing information on confidential basis to furnish non-confidential summary thereof and if, in the opinion of the party providing such information, the said information cannot be summarized, such party may submit to the Director General of Anti-profiteering a statement of reasons as to why summarization is not possible.
Rule 131 of the CGST Rules prescribes where the Director General of Anti-profiteering deems fit, he may seek opinion of any other agency or statutory authorities in the discharge of his duties.
18. Proceeding of the Director General of Anti-profiteering:
Rule 132 of the CGST Rules prescribes the power to summon persons to give evidence and produce documents,-
(1)The Authority, Director General of Anti-profiteering, or an officer authorised by him in this behalf, shall be deemed to be the proper officer to exercise the power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing under section 70 and shall have power in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).
(2) Every such inquiry referred to in sub-rule (1) shall be deemed to be a judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860). 133. Order of the Authority.-
19. Order of the Anti-Profiteering Authority:
Rule 133 of the CGST Rules prescribes the Order of the Authority, –
(1) The Authority shall, within a period of six months from the date of the receipt of the report from the Director General of Anti-profiteering determine whether a registered person has passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices.
(2) An opportunity of hearing shall be granted to the interested parties by the Authority where any request is received in writing from such interested parties.
(2A) The Authority may seek the clarification, if any, from the Director General of Anti Profiteering on the report submitted under sub-rule (6) of rule 129 during the process of determination under sub-rule (1).
(3) Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the Authority may order-
(a) reduction in prices;
(b) 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 including interest not returned, as the case may be;
(c) the deposit of an amount equivalent to fifty per cent of the amount determined under the above clause [along with interest at the rate of eighteen per cent. from the date of collection of the higher amount till the date of deposit of such amount in the Fund constituted under section 57 and the remaining fifty per cent. of the amount in the Fund constituted under section 57 of the Goods and Services Tax Act, 2017 of the concerned State, where the eligible person does not claim return of the amount or is not identifiable;
(d) imposition of penalty as specified under the Act; and
(e) cancellation of registration under the Act.
4) If the report of the Director General of Anti-profiteering referred to in sub-rule (6) of rule 129 recommends that there is contravention or even non-contravention of the provisions of section 171 or these rules, but the Authority is of the opinion that further investigation or inquiry is called for in the matter, it may, for reasons to be recorded in writing, refer the matter to the Director General of Anti-profiteering to cause further investigation or inquiry in accordance with the provisions of the Act and these rules.
(a) Notwithstanding anything contained in sub-rule (4), where upon receipt of the report of the Director General of Anti-profiteering referred to in sub-rule (6) of rule 129, the Authority has reasons to believe that there has been contravention of the provisions of section 171 in respect of goods or services or both other than those covered in the said report, it may, for reasons to be recorded in writing, within the time limit specified in sub-rule (1), direct the Director General of Anti-profiteering to cause investigation or inquiry with regard to such other goods or services or both, in accordance with the provisions of the Act and these rules.
(b) The investigation or enquiry under clause (a) shall be deemed to be a new investigation or enquiry and all the provisions of rule 129 shall mutatis mutandis apply to such investigation or enquiry.
20. Decision to be taken by the majority.-
Rule 134 of the CGST Rules prescribes that;-
(1) A minimum of three members of the Authority shall constitute quorum at its meetings. (2) If the Members of the Authority differ in their opinion on any point, the point shall be decided according to the opinion of the majority of the members present and voting, and in the event of equality of votes, the Chairman shall have the second or casting vote.
21. Compliance by the registered person:
Rule 135 of the CGST Rules prescribes that;-
Any order passed by the Authority under these rules shall be immediately complied with by the registered person failing which action shall be initiated to recover the amount in accordance with the provisions of the Integrated Goods and Services Tax Act or the Central Goods and Services Tax Act or the Union territory Goods and Services Tax Act or the State Goods and Services Tax Act of the respective States, as the case may be.
22. Monitoring of the order:
Rule 136 of the CGST Rules prescribes that;-
The Authority may require any authority of central tax, State tax or Union territory tax to monitor the implementation of the order passed by it.
23. National Anti-profiteering Authority:
The National Anti-profiteering Authority (NAA) has been constituted as the institutional mechanism under GST law to check the unfair profit-making activities by the trading community. The Authority’s main function is to ensure that traders are not realizing unfair profit by charging high price from consumers in the name of GST. The responsibility of NAA is to examine and check such profiteering activities and recommend punitive actions including cancellation of registration. The chairman, NAA along with 4 Technical members and with help of the Standing Committee, Screening Committee in every State and the Directorate General of Anti-profiteering in the Central Board of Indirect Taxes & Customs (C.B.I & C), work together on the anti-profiteering front.
24. Compensation to recipient:
Once the profiteering is established, National Anti-profiteering Authority can compel the defaulter to return to the recipient, an amount of equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of 18% from the date of collection of higher amount till the date of return of such amount.
25. Tenure of the Anti-Profiteering Authority:
Rule 137 of the CGST Rules prescribes that the Authority shall cease to exist after the expiry of four years from the date on which the Chairman enters upon his office unless the Council recommends otherwise.
26. Important decision of NAA:
In the matter of Director-General of Anti-profiteering v. Nestle India Ltd, reported-[2019] 112 taxmann.com 202 (NAA), it was held that Anti-profiteering provisions attracted for adopting incorrect methodology to pass on benefit of rate reduction.
The respondent is a subsidiary of Nestle group and is engaged in manufacturing and sale of various food products including coffee, noodles, chocolates, etc. GST rates on several products supplied by the respondent were reduced from 28% to 18% w.e.f. 15.11.2017 and from 18% to 12% w.e.f. 25.01.2018. Before any notice of investigation of profiteering was issued, the applicant suo moto deposited the profiteered amount of around Rs.16 crore in the Consumer Welfare Fund. National Anti-profiteering Authority ordered investigation by Director General of Anti-profiteering (DGAP) against the respondent.
As per the DGAP’s report, the respondent has resorted to profiteering by increasing base prices of around 300 stock keeping units (SKU) which were impacted by the rate reduction. The respondent passed on the benefit at the aggregate level of the SKU or at the product level whereas it was required to pass such benefit on every SKU so that the benefit could reach every buyer of that SKU. Hence, the methodology adopted by the respondent to pass on the benefit of rate reduction was incorrect. Therefore, the total profit made by the respondent was determined at around Rs.89 crores. The NAA directed the respondent to reduce the prices proportionately and to deposit the balance profit in the Consumer Welfare Fund.
Author Bio
I need following information which is required for my future requirement.
Ref: CGST Act Section 171 Anti-profiteering measure
Information required: If a customer book a flat in year 2020 in an apartment whose construction and sale was started in the year FY 2015-16 ( Pre GST period) and subsequently the same developer opted to charge 12% GST as being a ongoing project to the buyer on the total flat cost and the developer offer the possession after completion of Project construction and getting occupancy certificate from applicable authority in the Year 2021.
In this case scenario the home buyer booked the flat in the year 2020 and had paid 12% GST , so the home buyer is eligible to get Input Credit from Developer as section 171 of CGST Act2017 or not?
This ITC or input credit refund as per anti -profiteering clause applicable for the homebuyer who book a flat in an ongoing project where GST is charged at 12% if the booking done in current period ?