What are Anti-Profiteering Measures Under GST?
The GST authorities have set up a National Anti-Profiteering Authority (NAA) to monitor entities that hike GST rates inordinately. Anti-profiteering measures ensure that any reduction in GST rates or benefit of input tax credit should be passed on to the end consumer and not retained by entities. To prevent entities, from making excessive profits, GST authorities have implemented anti-profiteering measures. These measures help in keeping the prices down and keep a check on inflation. As the government actively considers a reduction in GST Rates for the growth of the nation, entrepreneurs need to understand anti-profiteering measures under GST. This article discusses anti-profiteering measures and how they impact the end consumer.
Legal Provisions on Anti-Profiteering Measures under GST
Anti-profiteering rules 2017, lay down provisions for the selection of members for NAA and a committee along with the procedure to be followed for investigations and powers given to the authority.
Under section 171 of the CGST/SGST Act, any reduction in prices due to lower GST rates or benefit of the input tax credit is to be passed on to the end consumer by the registered entity through a commensurate reduction in prices. If the registered person fails to do so, the authorities may cancel the registration on the basis of anti-profiteering measures.
Section 171 also mentions provisions about the central government having the authority to form a five-member committee to check whether the ITC availed by the registered person and benefits due to price reduction in tax rates have been passed on to the end consumer or not.
Anti-Profiteering Measures
Let us understand the anti-profiteering measures with an example, suppose a Ghee Dosa costs Rs 200 at a restaurant in its Delhi outlet while the same Dosa of the same outlet in Chennai costs Rs 150. The prices of the same Dosa are different for the same restaurant in different cities. Now after the tax rates of 12% on Ghee and 18% from 22% on air-conditioned restaurants, the cost of Dosa at a restaurant’s different outlets has to be the same.
Therefore, the government under the “expectations of cooperation” will ask the Delhi outlet to reduce the prices and the quantum of reduction should be a precisely weighted average of the GST rates reductions if applicable on Ghee and service tax. The anti-profiteering officer will calculate and inspect the price reduction of the restaurant’s Delhi outlet.
As GST boats of the slogan “one nation, one tax”, the prices of the same products and services have to remain the same across all 36 states and union territories. If such is not the case, then the government may take anti-profiteering measures to bring parity in prices.
Limitations of Anti-Profiteering Measures
- Whether the registered person has reduced the prices and provided the ITC availed commensurately or not, cannot be known to the government as there are no such measures to check on it
- Another limitation is that if the authorities ask the Delhi outlet of the restaurant to reduce the prices of Ghee Dosa, will it ask the Chennai outlet to revise or match the prices of the Delhi outlet under the slogan of “one nation, one tax”
- A CAG report highlights that the following questions should be raised and addressed to ensure smooth compliance with anti-profiteering regulations
- Explanation about the category of goods and services where rates were brought down
- Prices before transition to GST every month for each of the months for the last one year
Fate of Profiteers
Reporting to Anti-Profiteering Authority
Any person who believes that any registered person is engaged in illegal profiteering can raise the matter to the local screening authority. Then the matter will be examined by the state-level screening committee. If the state-level screening committee agrees that the matter has some merit, it will be forwarded to the standing committee consisting of both state and central government officers. The standing committee if satisfied raises the matter to the Director General of Safeguards.
Investigation by the Director General of Safeguards
The director general of safeguards will collect evidence, conduct an investigation, and issue notices to the parties. The notice contains a description of goods and services in respect of which proceedings have been initiated, a summary of the statement of facts, and the time limit allowed to the parties and other persons who may have other related information.
When all the information and hearings are complete, the director general of safeguards will provide a report of findings and it must be submitted within 3 months.
Order Under Anti-Profiteering Provisions
The members of the committee will pass an order after receiving the report of findings. The order mandates
- Reduction in prices
- Return to the recipient, an amount equal to the amount not passed on by way of commensurate reduction in prices along with interest
- Imposition of penalty as specified under the Act
- Cancellation of GST registration
Get Started with TaxDunia
The government introduced anti-profiteering provisions to benefit the end consumer and prevent entities from making inordinate profit. Though there are still certain loopholes in the exiting provisions, they are expected to produce favorable outcome for the economy by monitoring inflation. Reach out to TaxDunia that you know more about the anti-profiteering measures. Ensure that you do not engage in illegal profiteering whether knowingly or unknowingly. Our team of professionals will ascertain a smooth compliance for you. Let us connect today.
