Profiteer means a person who seeks exorbitant profits. Anti profiteering is a measure to curb such practice whereby trade and industry enjoy unjust enrichment by extracting profits and not passing it to the consumers. Section 171 of the CGST Act, 2017 states that if there is any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit, it should be passed on to the recipient by way of commensurate reduction in prices. now check more details for “Anti Profiteering Measures under GST” from below…
Anti Profiteering Measures under GST
The GST law contains provision on anti-profiteering measures so as to ensure that benefits accruing to businesses in GST regime due to lower cost and increased input tax credit is passed on to the consumers, to contain inflation and also curb undue profit advantage which businesses may take. Anti-profiteering measures, as contained in section 171 of the CGST Act, 2017 will help check price rise and put a legal obligation on business to pass on the benefit. This is a new concept being introduced for the first time in any tax law in India and is mandatory in nature. Central Government shall constitute an Anti-Profiteering Authority under Anti-Profiteering Rules, 2017 who will have far reaching powers including levy of penalty, recovery of benefit not passed and even cancellation of registration. However, such a provision comes with a two years sunset clause. It is desirable that anti-profiteering provision is enforced in rare cases as an exception, rather than as a rule and should not become a hindrance in free business environment where everything goes on in a reasonable manner.
“Commensurate” means equal in measure or size. The quantum of benefit received by the trade or industry due to GST should be passed on to the consumers.
Rule 122(Anti Profiteering Rules) of the CGST Rules, 2017 prescribes the constitution of the Authority formed to curb Anti Profiteering measures. The constitution is as depicted in the diagram below:
The Council may constitute two types of committees which are namely:
Standing Committee on Anti profiteering: It shall consist of such officers of the State Government and Central Government as may be nominated by it.
Screening Committee: It shall be a State level committee 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
The Additional Director General of Safeguards under the Board shall be the Secretary to the Authority
Duties 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,(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 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
ANALYSIS OF ANTI-PROFITEERING MEASURE
This is a new concept being tried out for the first time. The intention is to make it sure that whatever tax benefits are allowed, the benefit of that reaches to the ultimate customers and is not pocketed by trade.
The power has been given to Central Government to constitute an authority to oversee whether the commensurate benefit of allowance of input tax credit or reduction in the tax rates have been passed on to the final customer.
Sub- section (2) of section 171 of the Act provides for establishment of an authority for an anti-profiteering clause in order to ensure that business passes on the benefit of reduced tax incidence on goods or services or both to the consumers.
The authority constituted by Central Government will have powers to impose a penalty in case it finds that the price being charged has not been reduced consequent to reduction in rate of tax or allowance of input tax credit.
HIGHLIGHTS OF ANTI – PROFITEERING MEASURE (SECTION 171)
- To be administered by Central Government
- By new / existing authority
- Commensurate reduction in prices
- * Due to Input Tax Credit (ITC)
- * Due to reduction in cost
- May impose penalty for not passing benefit to customers
- Penalties to be prescribed