GST Anti-profiteering body: Aiming to protect consumers’ interest, the Narendra Modi government has given its nod for the establishment of a National Anti-profiteering Authority under GST (Goods and Services Tax). According to the Cabinet release, the anti-profiteering authority will “ensure that the benefits of the reduction in GST rates on goods or services are passed on to the ultimate consumers by way of a reduction in prices”. Even as the establishment of an anti-profiteering body was expected, the Cabinet nod comes within a day of the massive reduction in GST rate for restaurants from 18% and 12% to a flat 5%. Earlier, non-AC restaurants charged a GST of 12% and AC restaurants came under the 18% tax ambit.
The new GST rate of 5% was effective November 15, but soon after reports emerged of leading restaurant brands hiking their base prices. The hike in base prices has been done in a manner that the end amount paid by the consumer remained the same as in the 18% GST regime! Restaurants on their end are justifying the base price increase by saying that with the government withdrawing benefits of input tax credit, their material cost has gone up. However, some tax experts are of the view that the loss on account of input tax credit to restaurants would be far less than the 13% benefit that consumers would have reaped. Hence, there is no reason why the total bill amount that the end consumer has to pay should not come down, say experts. Clearly, the government too was of the view that the only way to check that benefits of lower rates are reaped by consumers is to set up an anti-profiteering body.
What is a GST anti-profiteering body?
Now, consumers who believe that the benefit of reduction in prices is not being passed on when they purchase any goods or services “may apply for relief to the Screening Committee” in the state where the issue has been faced. In case the issue relates to an item of mass impact with ‘All India’ ramification, “the application may be directly made to the Standing Committee. After forming a prima facie view that there is an element of profiteering, the Standing Committee shall refer the matter for detailed investigation to the Director General of Safeguards, CBEC, which shall report its findings to the NAA,” says the Cabinet release.
The GST Anti-profiteering body has the authority to act and tell the concerned business or supplier to reduce prices or undue benefit availed by it along with interest to the recipient of the goods or services. “If the undue benefit cannot be passed on to the recipient, it can be ordered to be deposited in the Consumer Welfare Fund. In extreme cases, the NAA can impose a penalty on the defaulting business entity and even order the cancellation of its registration under GST,” the Cabinet release adds.
How does the GST anti-profiteering body help consumers?
According to Abhishek Jain, Partner – Indirect Tax at EY India, the GST anti-profiteering body would ensure that the consumer remains the king. “A GST anti-profiteering body is a welcome move as it would keep a check on industry. Any benefit of lower rates that the government intends to pass on will find its way to the consumer,” Jain tells FE Online. “Recent reports suggest that restaurants are hiking base prices, implying that the benefit of reduction in tax rate from 18% to 5% is not being passed on. While restaurants are justifying it by saying that they now face a loss of input tax credit, an anti-profiteering body will be able to check such claims. Consumers can now file complaints and they will be acted upon,” he says. “More importantly, the very presence of the anti-profiteering body will act as a deterrent for the industry to not indulge in malpractices,” he adds.
While restaurants are just an example of the function of the GST anti-profiteering body, various industries that come under GST will have to keep in mind the presence of the authority when deciding on prices and the extent to which benefits of tax rate reduction can be passed on to the consumers.
via What is GST anti-profiteering body and how does it help consumers? – The Financial Express
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