Industry representatives are seeking more clarity in provisions to cut down litigation as the anti-profiteering provision in goods and services tax (GST) regime is set to stay longer than anticipated by businesses. GST law mandates that businesses pass on any cut in tax rate or the benefit of input tax credit to the consumer through commensurate reduction in price. There are, however, no industry specific guidelines to accurately compute the benefits that need to be passed on to consumers after any drop in the GST rate.
The government in September decided to extend the tenure of the National Anti-profiteering Authority (NAA) by a year till November 2022, after which pending cases would be transferred to the Competition Commission of India (CCI). This is the second extension of NAA’s tenure.
The anti-profiteering provision in GST law will continue in some form or the other till tax rates stabilize, a person familiar with the finance ministry’s thinking said.There would be a vertical within CCI that will adjudicate on anti-profiteering cases. GST rates are expected to change further and the anti-profiteering investigation and adjudication ecosystem will continue in some form or the other so long as the provision stays in the law,” the person said, requesting anonymity.
For the industry, that would mean continuing to dedicate time and effort to ensure there is a price reduction after tax rate cuts, which are accepted by the authorities to be commensurat.Currently, around 30 cases of alleged profiteering are being investigated, covering mostly fast-moving consumer goods (FMCG), cinema, and real estate companies.
There has been a lull in profiteering complaints during the coronavirus pandemic, but with the normalization of activities in every sphere, there could be more complaints in the coming days,” the person said.
The lack of clear rules and standard operating procedures by the government remains a challenge in calculating any commensurate reduction in prices of goods or services warranted after a GST rate cut or after grant of any previously unavailable input tax credit benefit, said Bimal Jain, chair, indirect tax committee of the PHD Chamber of Commerce and Industry (PHDCCI).
A lot of effort is needed for in-depth analysis with proper documentation along with financial justification to justify proportionate reduction in prices before the anti-profiteering authorities, Jain said.Given that raw material procured in bulk is used across products, accurately apportioning the tax benefit to be passed on to consumers on each of those products is a challenging task for businesses.
NAA should clearly lay down guidance and standard operating procedures for calculation and apportionment of the commensurate benefit for each sector or industry,” Jain said.Businesses also expect that GST slabs, which are likely to be further rationalized, will be kept at that level for a reasonable period of time for the sake of tax certainty. Several companies in the consumer goods, fast food and consumer electronics industries had earlier moved court questioning the constitutional validity of the anti-profiteering provision.