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Anti-profiteering under GST: Rules in the works to check unfair pricing before rollout

The government has begun discussions to bring rules pertaining to the anti-profiteering provision under Goods and Services Tax (GST) to ensure that companies benefiting from tax reduction ensure a commensurate lowering of prices for the consumer. The revenue department is likely to finalise the rules pertaining to anti-profiteering closer to the GST rollout date of July 1, a senior government official said.

“The tax department is considering bringing in rules for anti-profiteering. Even though it may take some time to put the machinery in place for anti-profiteering after GST rollout, the rules will be finalised by the implementation date,” the official said.

Following the finalisation of the rules for anti-profiteering, they would need to be approved by the GST Council.

The official added that there are reports of companies, especially some big FMCG companies, jacking up prices before GST rollout and the rules will ensure that companies do not indulge in such unfair pricing before GST rollout.

“Companies will benefit from the input tax credit and removal of the cascading impact of taxation under GST. So, they should ensure that consumers also reap those benefits,” the official said.

The CGST law provides that 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 (consumer) by way of a commensurate reduction in prices.

On Friday, after the fourteenth GST Council meeting, Revenue Secretary Hasmukh Adhia had said that even if the machinery for anti-profiteering takes time to be ready after GST implementation, they will have the right to call for information of change in prices retrospectively. “The machinery for the anti-profiteering authority may not be ready at present but any change in prices will be called into be questioned,” Adhia had said, adding that any fluctuations in prices will be closely monitored.

He had also said that the GST Council has ensured that the effective tax incidence under GST remains lower than the existing total effective tax incidence at present and therefore, companies should pass the benefit of gains from input tax credit to consumers.

Last month, the government had said that it hoped not to use the anti-profiteering clause much and it is meant to apply only during a short transitional period. The anti-profiteering clause is meant to be a deterrent and will be triggered only if there is a credible complaint, Adhia had said last month.

The industry has raised concerns about the anti-profiteering clause in GST laws, saying that it is open to misuse and subjective interpretation as it is difficult to measure how much would amount to commensurate reduction in prices with respect to a lower tax incidence.

The government is expected to expedite the process to put in place an anti-profiteering machinery, with a quasi-judicial body or an existing authority like Competition Commission of India likely to be the monitoring body for the provision.

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