Anti-profiteering Clause in Goods and Service Tax

By | June 12, 2017

anti-profiteering clauseThe draft goods and services tax (GST) law has proposed an anti-profiteering mechanism to ensure benefit of lower taxes is shared with consumers, and indicates no tax on securities and subsidies provided by the government as also free of cost supplies.

In order to prevent any rise in price of commodities after goods and service tax (GST) implementation

  • the Center has proposed an ‘antiprofiteering‘ measure to ensure that
  • trade and industry pass the benefits of reduction in tax rates to consumers.

Antiprofiteering provision in Goods and Service Tax law is retrograde on Business Standard. It is to check unfair pricing before roll out.

“Clause 171 has been inserted in the Goods and Service Tax Bill which provides that it is mandatory to pass on the benefit due to reduction in rate of tax or from input tax credit to the consumer by way of commensurate reduction in prices.”

There are many aspects that are currently unknown. Government empowers an authority to examine.

  • An officer from the new “Anti Profiteering Authority of India” will do the calculation and
  • inspect whether the company has indeed price of commodity or not.

The purpose is to protect the consumer from inflation after the introduction of Goods and Service Tax. It is price manipulation. But the end consumer may have some reason to cheer, the industry is doubtful of its implementation yet.

One of the major contentions of industry against anti-profiteering clause is-

  • the lack of clarity on rules related to valuation and tax rates.

Unless government do the categorization for all the goods and services and map a tax rate to each category,

  • companies will not be able to frame their strategy on product pricing under the new regime.

In conclusion, government has designed this new “weapon” in the arsenal of the Union government and launched as part of the GST Bill. There is much consternation among policy analysts and economists over multiple GST rates rather than just one rate for all goods and services. Poetic as it may have been, a “one nation, one tax” was never possible in a diverse and complex federal polity, such as India.

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