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Anti-Profiteering under GST

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Anti-Profiteering under GST

 

What is Anti-profiteering?

It is a clause inserted under GST Provisions to eliminate unjust profit earned by businesses. If there is any reduction in the GST rate or the benefit of Input tax credit should be pass on to the end consumers and not retained by the business.

For Understanding Anti Profiteering one needs to understand the unjust profit element which is explained as under:

GST was introduced to eliminate cascading effect of taxes resulting in lesser burden to the end consumers. Subsequent to its implementation, taking into consideration the burden on end consumers, the rates of GST on many products were also slashed. All this is done in order to achieve lower prices for the consumers. However, many companies have misused this situation in order to generate money.

Therefore, Central Government has constituted National Anti-profiteering Authority to examine whether the input tax credits availed by any registered person or the reduction in the tax rate have resulted in reduction of prices of goods or services or both. Also they will ensure that the consumer is been protected from arbitrary price increase in the name of GST.

Example: A2Z Pizza is a restaurant and a normal taxpayer. Here is how GST law affects his business. 

Particulars

Before GST (Before 01/07/2017)

After GST (18% with ITC) (Till 14/11/2017)

After GST (5% without ITC) (Since 15/11/2017)

(Amount in Rs.)

Food Value (inclusive of Normal Business Profits)

400

400

400

Add: Service Charges

40

40

40

Add: Taxes

     

VAT @14% on food value

56

-

-

Service Tax @6% on food value

24

-

-

Service Tax @15% on Service Charges

6

-

-

GST on Food Value and Service Charges

-

79.2

22

Total Cost to Consumer

526

519.2

462

As seen above, the prices of food items should have decreased drastically.

 

Rajesh visits A2Z Pizza Regularly and orders his favorite Special Pizza. Here’s a summary of his visits to A2Z Pizza:

Date of Order

Bill Amount (Inclusive of all Taxes)

31/05/2017

526

10/11/2017

526

22/11/2017

526

Here, A2Z Pizza did not pass the benefit of lower prices to Rajesh. It instead made unjust profits of out of the benefits intended for end consumers like Rajesh.

What is the role of Government in such cases?

The Government has inserted a Anti-profiteering clause to penalise the business making unjust profits under GST regime by not passing on the benefits to the end consumers. Also a National Anti-Profiteering Authority has been constituted. It accepts complaints by any person against businesses who are indulging in these malpractices of earning unjust profits.

I am victim to such unjust profits by business. How do I file a complaint?

For filing a complaint, Form APAF - 1 needs to be filled and submitted to the Central Standing Committee on anti-profiteering or State Screening Committee on anti-profiteering.

The application form is applicable only for complaint in respect of a single product. In case the end customer wants to report more than one product, he may do so my submitting multiple forms, one each for each product/ service. The application must be accompanied with necessary documents, failing which the application shall be treated as invalid. The Government may ask for additional documents/ evidence as they deem fit.

 What are the documents required to be attached along with the Application?

  1. Proof of Identity
  2. Copy of invoice/s
  3. Price list (if any)
  4. Working sheet showing Computation of the Input Taxes/ Duties Pre-GST per unit, credit of which was not available to the supplier before implementation of GST and other calculations in the manner specified by the Form APAF - 1.

What are the consequences for business found guilty of making unjust profits?

If the National Authority finds that a business is guilty (after providing the business an opportunity of being heard, upon request by the business), then the Authority may order any of the following:

  1. Reduction in Prices
  2. Return the unjust profits made by him along with interest @18% p.a
  3. Levy of penalty on the business
  4. Cancellation of GST Registration of the business

Actions taken by the Anti-Profiteering committee

The Committee has issued notices to various businesses like Hardcastle Restaurant (Mcdonald’s franchisee), Hindustan Unilever Limited, Pyramid Infratech, Honda Dealer, Lifestyle, DG Safeguards as an anti-profiteering measure. The proceeding for above are underway.

Conclusion:
The government has thus constituted this Authority with a moto that "Profit is fine but Profiteering is not". Thus, if any supplier is supplying goods / services at higher prices in name of GST, have to be reported to the appointed authorities to protect the interest of the end consumers



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