With the National Anti-Profiteering Authority being established, the Confederation of Indian Industry has called for greater clarity on rules to curb price increase due to GST roll out.
Practical implementation of the regulations without ambiguity and much scrutiny is required, particularly in the initial days till the system stabilises, said CII in a statement on Sunday.
The anti-profiteering clause was necessitated to keep a check on unethical high profits, analyse long term effects of GST rollout, control on price rise and establish consumer trust in the new tax regime.
The rule says, “benefit of input tax credit should have been passed on to the recipient by way of commensurate reduction in prices”. However, as this definition is not clear, discretionary bias may creep in, pointed out CII.
Several factors contribute to pricing decisions, such as supply and demand, supplier’s cost and taxes. Pre-GST and post-GST profits may also be influenced by factors such as lower logistics costs and free flow of goods and services across States, elimination of certain taxes and better efficiency.
The anti-profiteering clause of the GST law should provide clarity on rules and regulations regarding valuation assessment and impact of taxes.
The anti-profiteering clause could lead to hardship for small enterprises in particular. There is concern that practical and procedural challenges may be faced during the initial implementation period of the anti-profiteering clause, said CII.
Tax authorities need to be sensitive to natural business outcomes and avoid undue harassment. Also, the clause gives relatively less time for preparation and adoption of the new provisions.
Another challenge is complicated compliance. The government would need to compare cost of every product pre-GST and post-GST to determine the amount of tax benefit applicable, it said.
While the objective of the anti-profiteering rules is logical and industry is willing to comply, implementation is challenging. Effective anti-profiteering provisions that are clear are needed to ensure that GST provides tax benefits to consumers, said CII.
(This article was published on January 7, 2018)