Anti-Profiteering Clause Has Miles To Go

While the move will eventually prompt players to pass on GST benefits to consumers, a credible impact will take time, say experts.

- S Vijaykrishnan

What is anti-profiteering?

Anti-profiteering has been among the key concerns surrounding the onset of the Goods & Services Tax (GST) regime. Anti-profiteering is a clause inserted in the GST Act (Under Sec 171) to ensure that traders/ companies pass on the benefit of lower taxes under the GST to the end-consumer.

Broadly stating the impact in numbers, Bangalore-based chartered accountant Anshuman AS, elucidates via a numerical example, “If all these days, what I bought was subject to a value-added tax (VAT) of 14.5% and it has now been reduced to 5% under GST, the trader (company) has to ensure that he gives me a discount of 9.5% (i.e. the differential).”

The GST benefit that the trader/ company passes on to you arises from the ‘input tax credit’ availed by him (for more details on input tax credit refer to our articles — “Input Tax Credit to Benefit End-customer” and “Will GST Really Spike Up Your Bills?” in our June 2017 issue).

What does the law say?

Section 171 of the GST Act echoes the above point— “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”. The law also facilitates the setting up of an Anti-Profiteering Authority (APA notified by the government and likely to be set up by mid-August), which can impose penalties on players who do not pass on the benefits from input tax credit to consumers.