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Anti-Profiteering Measure Under GST-An Overview

23 Jul,2018

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. 


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Authorised Representative under GST- An Overview

23 Jul,2018

Authorised  Representative plays a crucial role by appearing as a legal representative of another person in adjudicating proceedings under GST regime. Section 116 provides qualification,disqualification and other procedures relating to authorised representative which are articulated under this article.

  1. Concept of authorised representative

             Authorised  Representative is a authorised by a person to appear on his behalf in any proceedings. ‘Authorised Representative’ has been defined  in the Goods and Services Act itself. Section  2(15) of the  central Goods and services Act ,2017 (hereinafter reffered to as “ the CGST Act”) defines ‘authorised representative’  as     representative reffered to in section 116. Broadly, it includes a relative, a regular employee, an advocate, a charted accountant, a company secretary, or any person with prescribed qualifications. It is also provided that indirect tax gazetted officers can appear as authorised representative after one year from retirement.

         The GST law also specifies for some disqualification for an authorised representative such as dismissal from government service, conviction under some specified Acts, insolvency, misconduct, etc. Such orders of disqualification are, however , required to be passed after complying the principles of natural justice.

2 . Appearance by authorised representative

       Section 116(1) provides that any person can appear by an authorised representative in any proceedings under the Goods and Services regime.By virtue of this, an authorised representative can appear before the following authorities-

  1. GST Officers,
  2. The Appellate Authority under GST Law,
  3. The Appellate Tribunal under GST Law.

        However, a person is not allowed to appear by an authorised representative  when he is required  under the Act to appear personally for examination on oath or affirmation.

3.   Persons who can be authorised representative

          Section 116(2) places limitation on the persons  who may be authorised to represent before the authorities. The following categories of persons are so permitted to act as an authorised representative on his behalf -

  1. Relative or persons regularly employed by the registered person

                Relative or regular employee of an registered  person  who has authorised him to act can be appointed as an authorised representative.

       2. Advocate

            An advocate who is entitled to practice in any court in india, and who has not been debarred from practicing  before any court in india, can represent the assessee.

    3. Professionals

           Any  charted accountant, a cost  accountant or a company secretary who holds a certificate  of  practice and who has not been debarred from practice, are permitted to act as an authorised representative.

    4. Government officers

        A retired officer  of the Commercial tax  department of any State Government or Union  territory   or of the Board who, during his services under the Government had  worked  in a post not below the rank than that of a Group –b Gazetted officer for a  period of not less than two years  can be  a appointed as an authorised representative.

        However, such officer  would  not be entitledto appear before any proceedings under the GST Act  for a period of one year from the date of his retirement or resignation.

 5. GST  practitioner

           A GST  practitioner would  also be allowed to appear as authorised  representative before any  officer of  department, Appellate  Authority or Appellate Tribunal, on behalf  of a registered person who has authorised  him to be his GST practitioner.

4.  Disqualification for acting as an  authorised representative  

       The Disqualifying factors in relation  to a person representing the assessee under section 116 are contained in sub-section  (3) thereof which are as follows:

  1. Who has been dismissed or removed from Government services; or
  2. Who is convicated of an offence connected with any proceedings under this Act, the State  Goods and  Services Tax Act, the Integrated Goods and Services Tax  Act or the  Union  Territory Goods ad Services Tax Act, or under  the existing law or under any of the Integrated  Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, or under the existing law  or uder any of the Acts passed by a State Legislature  dealing with the imposition of taxes on sale  of goods or supply of goods or services or both;  or
  3. Who is found guilty of misconduct by the prescribed  authority;
  4.  Who has been adjudged  as an insolvent.

Such disqualifications  to act as an authorised representative  would  work  for the  period as mentioned under-

  1. For all times in case of persons reffered  to in clauses  (a),  (b)  and (c); and
  2. For the period during which  the insolvency  continues in the case of a person reffered  to in clause (d).

5. Action  for misconduct of an authorised representative 

         In term of rule  116 of the CGST Act, 2017, where an authorised representative, ( other than those  advocate/  CA/  CS/  CWA) is found, upon an enquiry into the matter, guilty  of connection with any proceedings  under the act, the Commissioner may, after providing him an opportunity of being heard , disqualify him from appearing as an authorised representative.

6. principle of natural justice to be followed

         The principle of natural justice has to be observed before any adverse action is going to be observed before any adverse action  is going to be taken against the assessee. One of the grant of an opportunity of hearing, oral or in writing,before conclusion  is arrived at by the authority exercising their powers.

7. Applicability of SGST Act/ UTGST Act

         Any person who has been disqualified under the provisions of the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act will be deemed  to be  disqualified under the GST Act as stated under section 161(4) of the CGST Act.

8. Applicability of IGST Act

         Section 20 of the IGST stipulates that the provisions of the CGST Act would, mutatis mutandis, apply to integrated  tax as they apply in relation to central tax as if these are enacted  under this Act. Accordingly, there is no separate provisions regarding authorised representative under the IGST Act, thus, the provision available  under the CGST Act, is made applicable to IGST  Act.


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Before Passing an Order Under Section 263 Principal Commissioner or Commissioner of Income Tax Has to make His/Her Own Enquiry

23 Jul,2018

In the case of Pr.CIT, New Delhi v. Delhi Airport Metro Express Pvt.Ltd. [ITA No. 705/2017, decided on 5-9-2017]  the Commissioner  opined that assessing officer allowed depreciation in excess of what was assessing officer  to make fresh assessment. The Delhi High Court held that for the purpose of exercising jurisdiction under section 263 of the Act, the conclusioin that the order of the assessing  officer is erroneous and prejudicial to the interests of the Revenue has to be preceded  by some minimal inquiry. That basic exercise of determining as to what extent the depreciation was claimed in excess has not been undertaken by the Pr. CIT. He had exercised the second option available to him under section 263(1) of the Act by sending the entire matter back to the assessing officer for a fresh assessment. That option, in the considered view of the Court,can be exercised only after the Pr. CIT undertakes an inquiry himself. The   High Court held that revision was not justified.The learned author discusses the case in detail.      

  1. Introduction

            Subject to it’s Explanations, section 263(1) of the Income Tax Act,1961 (‘Act’) states that the principal Commissioner may call for and examine the record of any proceeding under the Act, ad if he considers that any order passed therein by the assessing officer is  erroneous  on so far as it is prejudicial to the interests of the revenue, he may after giving the assessee an opportunity    of being heard and after such order thereon as the case justify, including  an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

            More recently, in Pr. CIT, New Delhi  v. Delhi Airport Metro Express pvt.Ltd. [ITA No. 705/2017, decided on 5-9-2017], the short question  raised by  the Revenue was whether the ITAT was justified in setting aside the order  of the Principle Commissioner  of Income Tax  (‘Pr. CIT’)  passed  under  section 263  of the Act  in  respect of assessment year 2011-12 setting aside the original assessment order  dated 31-12-2013 passed by the Assessing Officer  (‘AO’) under section 143(3) of the Act.

2. Facts of the case

            The brief  facts in the above –mentioned case were that the assessee being a concessionaire of the Airport Metro Express Project of the  Delhi Metro Rail Corporation  Ltd.  (‘DMRC’) under a Build-Operate-Transfer (‘BOT’)  Scheme, had accepted the concession  for a period of 30 years During the assessment year in   question, the assessee claimed depreciation of Rs.112,29,74,447, on fixed assets  of Rs.15,60,48,17,189 50% of the eligible depreciation rates since, during the assessment year in question, the assets were used  for less than 180 days. The assessing officer framed the assessment under section 143(3) of the Act allowing depreciation as claimed by the assessee.

           The case of the revenue was that the assets were developed under the BOT scheme and  the assessee was not eligible to claim depreciation as it was not the owner of the assets. The Revenue contended that the land for the project was handed over by the DMRC to the assessee  as Concessionaire  of the  basic structure was also done by the DMRC.

          The case of the assessee was that during the assessment year in question it had purchased and installed plant and machinery and such plant and machinery was legally owned by it. It was further contended that since such assets were used for the purpose assessee’s business,it was entitled  to claim depreciation under section  32 of the Act.

          The Pr. CIT, in exercise of powers under section 263 of the Act issued a show cause notice (SCN)  dated 16-3-2015  to the assessee pointing out that if the value of  these fixed assets  were to be amortized evenly over a period of 30 years, the amount  of to be amortized  would only be Rs.52,01,60,572 for each year. Therefore, the depreciation allowed to the assessee was in excess by Rs. 60,28,13,875 and, to that  extent, the order passed by the assessing officer  was prejudicial to the interest of the Revenue. In reply to the SCN, the assessee took the stand that, interest of the Revenue. In reply to the SCN, the assessee took the stand that, during the assessment year in question, it “had purchased the assets from independent vendors, out of its own funds for settings up the project.

           Thereafter, order dated 30-3-2016 was passed by the Pr. CIT.

3. Thus held the court

             The learned Judges of the Delhi High Court observed that for the purpose of exercising jurisdiction under section 263 of the Act, the conclusion that the order of the assessing officer is erroneous and prejudicial to the interests of the assessing officer is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimum inquiry. In fact, if the Pr. CIT was of the view that the AO did no undertake any inquiry, it became incumbent on the Pr.  CIT to conduct such inquiry. All that Pr.  CIT had done in the order was to refer to the Circular of the CBDT and conclude that “in the case of the assessee company, the assessing  officer  was duty bound to calculate  and  allow  depreciation  on the BOT in conformity of the CBDT Circular No. 9/2014 but the  assessing  officer is  erroneous insofar  as prejudicial  to the interest of revenue”. In the considered view of the Court,this  can hardly constitute jurisdiction  under section 263 of the Act. In the context of the  present case depreciation on assets like land  and building, it was  incumbent upon the purchased and installed by the assessee out of its own funds during the assessment year in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of  the determining as to what extent the depreciation was claimed in excess has not been undertaken by the Pr. CIT. He had exercised the second option available ro him under section 263(1) of the Act by sending the entire matter back to the assessing officer for a fresh assessment.  That option, in the considered view of the Court, can be exercised only ofter the  Pr. CIT undertakes an inquiry himself in the manner indicated hereinbefore. That was missing in the present case.

           Finally, the Delhi High Court held, in respect of the appeal, that the ITAT was not in error in setting aside the order  of the Pr. CIT under section  263 of the Act, no substantial question of law arose herein.


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