It’s Official: An Agency To Counter Profiteering Under GST
Companies may lose CGST registration if they indulge in profiteering, according to the anti-profiteering rules.
The government on Tuesday notified anti-profiteering rules under the Goods and Services Tax (GST) regime. BloombergQuint had reported on most of these rules earlier.
The anti-profiteering authority, to be called National Anti-Profiteering Authority, will have the power to cancel the registration of any trader or manufacturer which fails to pass on to consumers the benefit of lower taxes under the new indirect tax regime, according to a statement released on the website of the Central Board of Excise and Customs.
The six-member body can also order reduction in price commensurate with lower tax incidence under GST. It can seek to recover the profiteered amount – the undue profit earned from not passing on the reduction in incidence of tax to consumers – along with an 18 percent interest. The government body can also levy a penalty.
However, the authority will not be able to take any of these steps suo motu or on its own but only based on a complaint filed by a consumer or a commissioner.
The Resolution Process
The process would be a three-stage mechanism which will include three bodies: Standing Committee on Anti-Profiteering, Directorate General of Safeguards, and the National Anti-Profiteering Authority.
The anti-profiteering body will get up to 11 months to pronounce its order on a complaint, based on its observations, the rules said.
A Standing Committee on Anti-Profiteering will be constituted, comprising state and central government officials nominated by the GST Council.
This committee will get two months to examine the complaint, and if it finds that the complaint has adequate evidence of profiteering, it will refer the matter to the Directorate General Safeguards for a detailed investigation, as per the rules.
The directorate will have to issue a notice to both the parties involved, which would include information on the product and the details of the allegation. The notice would also include the deadline for a reply.
The directorate will then get three months to complete its investigation and an extension of another three months can be given if approved by the Standing Committee.
Once a report is submitted, the National Anti-Profiteering Authority will have three months to give its verdict.
Industry experts said they will adopt a wait-and-watch policy for the body.
While it’s important that any legitimate reduction is passed on to the consumer, the industry would now look at the receptivity of the department wherein it could justify that there is indeed no significant reduction to be passed on.Suresh Nandlal Rohira, Partner, Grant Thornton India
This authority will comprise a chairman, a secretary and four members. The chairman will have to be a judge of any court or a member of Indian Legal Service, having held a post of additional secretary rank for three years. The secretary of the anti-profiteering agency is likely to be the Additional Director of Safeguards, a senior government official had told BloombergQuint on Tuesday.
PwC’s Sumit Lunker does not see the mechanism as an encouraging one.
The process proposed by government seems to be cumbersome and time consuming and will not be encouraging for business community. There is no time prescribed for standing committee to report the matter to Directorate of Safeguard.Sumit Lunker, Partner (Indirect Tax), PwC
The anti-profiteering body has been provisioned to be in existence for just two years unless the GST Council extends its tenure.