AntiProfiteering measures

Anti-Profiteering Measures under GST

The Anti-Profiteering Rules, 2017, (defined under Section 171 of the Central Goods and Services Tax Act 2017) as the name suggests, prevents entities from making excessive profits due to lowering of GST.

Once the registered entity, which has profiteered illegally, is identified, it can be asked to

  1. Reduce the prices if it has hiked them excessively
  2. Pass on the benefits to consumers or if the beneficiary cannot be identified,authorities will ask the company to transfer the amount to the consumer welfare fund within a specified timeline, along with 18 percent interest as a penalty for not passing on the benefit to the customer

The competent authority also has the power to cancel the GST registration of the business entity failing to pass on the benefits to the customer under lower GST but will be the last step against any violator.

The Anti-profiteering mechanism helped,as a price control mechanism, curb inflation in countries like Australia and Singapore after implementation of GST in the respective countries.

As per the structure of the anti-profiteering mechanism in the GST regime, complaints of local nature will be first sent to the state-level screening committee while those of national level will be marked for the Standing Committee.

It has been in news recently as the investigation arm of the Revenue Department has sent notices under the Goods and Services Tax (GST) anti- profiteering law to three entities,for allegedly not passing benefit of cost reduction to consumers.

The Director General of Safeguards (DGS) has been entrusted to investigate these cases.They have sent notices to a few entities which haven’t passed on benefits to the customer due to reduced prices of over 170 goods and services which effect from November 15, 2017.

According to the notices posted on DGS website,these entities have been asked to submit copies of balance sheet, profit and loss account of 2016-17, GST returns for July-September and details of invoice wise outward taxable supplies price list prior to and post 15 November, 2017.

They have been given time till 12th January to file their reply with the above details stating whether they admit that the benefit of reduction in tax rate or input tax credit has not been passed on to consumers by way of commensurate reduction in prices.