Anti-Profiteering Measure Under GST-An Overview

The learned author attempts to make an overview of anti-Profiteering measure introduced under the GST regime and the scope of powers of National Anti- Profiteering Authority.

  1. Anti- Profiteering measure- Meaning

          It is fundamental  spirit of an indirect tax regime  that reduction in rate of tax any supply of goods  or services or the benefit by input tax  credit should have been passed on to the recipient by way of commensurate reduction in prices. However, it has been the experience of many countries  that when GST  was introduced there has been a marked increase in inflation and the prices of the commodities. This happended  in spite of the availability of the tax credit right from the production stage to the final  consumtion stage which should have actually  reduced the final prices.

This was obviously  happening because the supplier was not  passing on the benefit to the consumer and thereby  indulging in illegal profiteering.  

    With the introduction of GST regime in india, National Anti- Profiteering Authority has been constituted central Government 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 o fthr goods or services or both supplied by him,this is to ensure that thecosumer is protected from arbitrary price increase  in the name of GST.

      2.Statutory provisions 

                   The statutory provision relating to anti- Profiteering measure are enshrined under section 171of the CGT Act.Rules  123 to 133 of the CGST Rules,2017 deal with provision in  respect of constitution of the National Anti- Profiteering Authority  and scope of its powers.

         As per  sub–section  (1) of section 171 of the CGST /SGST  Act, any reduction in rate 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.

        As per sub- section  (2) of section 171, 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 force, to examine whether input tax credits availed by any registreted person  or the reduction in the tax rate have actually resulted in a commensure reduction in the price of the goods or services or both supplied by him.

               It is  clear from the above that when input tax credit is availed  of by an registered person, the amount of tax is excluded from the purchase price or cost the goods and the input tax credit is used for discharge of output tax on outward supply. The Authority constituted under sub-section  (2) of section 171 is required to examine  that input tax  credits  availed by any registered person results in a  commensurate reduction in the price of the goods or services or b both supplies by him.

              The Authority is also required to ensure that any reduction in the tax rate  must result in a   commensurate  reduction in the price of the goods or services or b both supplies by him.

        3. Constitution of Authority

          The National Anti- Profiteering  Authority shall be a five-member committee  consisting of a Chairman  who holds or has held a post equivalent  in rank to a Secretary to the Government  of India ; and four technical Members who are or have been  Commissioners of State  tax  or central  tax or have held an  equivalent  post under existing laws.

          The Additional shall cease to exist after the expiry of two years from the date on which the Chairman enters upon his office unless the Council recommends otherwise.

     4.Power to determine the methodology and procedure

           The Authority can determine the methodology and procedure for determination as to whether the reduction in the rate of tax on the suppy of goods or services or the benefit by way of commensurate reduction in prices.

     5.Duties of  Authority

          As per  rule 127 of the CGst Rules, the Authority would have the following duties:

        (i) to determine whether any reduction in the rate of t axo any supply of goods o services or the benefits of input tax has been passed o to the               recipient by way of commensurate reduction in prices;

       (ii) to identify the registered person who has not passedon 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 per cent. Fromthe date of collection of the higher amount  till the  date of  the return of such amount or                        recovery  of the amount or recovery of the amount not returned, as the case maybe, in case the eligible person  does not claim return                      of the amount or is not identifiable, and deposite the same in the  Consumer Welffare Fund;

            (c) Imposition of penalty; and

            (d) Cancellation of registration.

   (vi)   to furnish a performance report to the Council by the 10th of the close each quarter.

    6. Application to the Authority

            According to sub-rule 128, the Standing Committee shall within a period of two months from the date of the receipt of a written application froman 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 goods or to the recipient by way of commensurate reduction in prices.

     All  applications from interested parties on issues of local nature shall first be examined by the State level Screening  Committee constituted in each State by the State Government consisting  of an officer of the State Government to be nominated by the Commissioner, and an officer of the Central Government to be nominated by the Chief Commissioner.

   7. Initiation and conduct of proceeding 

          In terms of sub-rule  (1) or  rule  129, if 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 thesupply 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 Safeguards for a detailed  investigation

        In terms of sub-rule  (3)  of rule 129, if the Director  General of Safeguards shall conduct

investigation  and  collect evidence necessary to determine undue profiteering and before initiation of the investigation,issue a notice to the  interested parties (and to such other persons as deemed fit for a fair enquiry into the matter) 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.

       The evidence or information presented to the Director General of Safeguards by one interested party can be made available  to the other   interested parties  participating in the proceedings in the proceedings. The evidence provided will be  kept confidential  and the provisions of section 11 of the Right to Infomration  Act,2005, shall  apply mutatis to the disclose of any information which is provided on a confidential basis.

       The Director General of Safeguards can seek opinion of any other agency or statutory  authorities  in the discharge  of his duties. The Director Genearal of Safeguards,or an officer authorised by him will have the power to summon any person necessary either to give evidence or to produce a document or any other thing. He will also have same powers as that of a civil court and every such inquiry will be a judicial proceeding.

       The Director General of   Safeguards will complete the investigation within a period of three months  for reasons to be  recorded  in writing as allowed by the Standing committee and, upon completion of the investigation, furnish to the Authority, a report  of its findings along with the relevant records.

  8. Confidentiality  of information

          For the purpose of ensure confidentiality of information, it has been provided  that 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, shall apply mutatis mutandis   to the disclosure of any information which is provided on a confidential  basis.

         It is also provided under sub-section  (2) of section  130  that the Director General of Safeguards may requie the parties providing information on confedential basis  to furnish non-confidential summary   thereof and if in the opinion of the party providing  such information, the said information cannot be summarised, such party may submit to the Director General of Safeguards  a statement of reasons as to why summarisation  is not possible.

  9. Cooperation with other agencies or statutory authorities

        As per rule 131 of the CGST Rules, where the Directors General of Safeguards deems fit, he may seek opinion of any  other agency or statutory.

        Authorities in the discharge  of his duties.

  10. Power to summon persons to give evidence and produce  documents

           In terms of sub-rule 132,the Director General of Safeguards, 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 inquiry in the same manner, as provided in the case of a Civil Procedure,1908.

           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.

   11. Order of the Authority

       As per  sub-rule  (1)  of the CGST Rules, the Authority shall (after  granting  an opportunity of hearing to the interested  parties if so requested) within a period of three months  from the date of the receipt  of the report from the Director General  of Safeguards determaine whether a register 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. 

       If the Members  of the Authority differ in opinion  on any point, the point shall be decided according  to the  opinion of the majority.

       Where the Authority determines that a registered  person has not passed on the benefit  of the reduction in the rate of tax credit to the recipient  by way of commensurate reduction in prices, 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 interested 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 of amount including interest 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 refered to in section 57;

     (c) Imposition of penalty as specified  under the Act ; and

     (d) Cancellation of registered under the Act.

          Any order passed by the Authority 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 service Tax Act  or the Central  Goods and Services Tax Act or the Union territory Goods and Services Tax Act of the respective States , as  the case may be.

     The Authority can  direct any authority of central  tax,State tax or Union territory tax to monitor the impletion  of the order passed by it.

  12. Decision to be taken by the majority

        As per rule 134 CGST Rules, if the Members of the Authority differ in opinion on any point, shall be decided according to the  opinion of the majority.

 13. Compliance by the registered person

       In terms  of rule  135 of the CGST Rules, any order passed by the Authority 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 State goods and Services Tax Act of the respective States, as the case may be.

 14. Summing up

         Anti-profiteering measures are globally Accepted policies which are implemented by various  countries for controlling temporary inflationary prices of goods and services  during the transition  phase of implementation of GST. Anti-profiteering measure are adopted for providing benefit of GST to the consumers in terms of reduced prices and curbing more profit margins to the businessmen sought to be earned due to rise in prices of goods and services resulting inflation in country.