Anti Profiteering Clause Operational Now

ANTI PROFITEERING CLAUSE OPERATIONAL NOW

Dr. Sanjiv Agarwal
FCA, FCS

The provisions on anti-profiteering are contained in the GST law as per following provisions:

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CGST Act, 2017 Section 171 on Anti-profiteering measures.
IGST Act, 2017 Section 20 which stipulate that provisions of the GST Act, 2017
shall apply mutatis mutandis to IGST Act.
UTGST Act, 2017 Section 21 which stipulate that provisions of GST Act, 2017
shall apply mutatis mutandis to UTGST Act.
SGST Act, 2017 Section 171 on Anti-profiteering measures.

The Rules for Anti Profiteering are contained in Chapter XV (Rule Nos. 122 to 137) of the Central Goods and Services Tax Rules, 2017.

As per section 171 of the CGST/SGST Act, any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. An Authority may be constituted by the government to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

As per rule 127, Anti-Profiteering Authority (APA) shall be duty bound to:
· determine whether any reduction in rate of tax on any supply of goods or services or the benefit of the input tax credit has been passed on to the recipient by way of commensurate reduction in prices.
· identify the registered person who has not passed on the benefit of reduction in rate of tax on supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices.
· pass an appropriate order.

The powers to take action are also listed as duties whereby it can order price reduction, refund of profit, recovery, penalty or even cancellation of GST registration.

The Authority constituted by Central Government will have powers to impose a penalty in case it finds that the price being charged has not been reduced consequent to reduction in rate of tax or allowance of input tax credit.

There has been considerable delay in constitution of anti-profiteering authority which took almost five months since GST was introduced and consumers had to face the brunt of inflation and undue profiteering. Now that GST Council has substantially lowered the tax rates on host of items, if the Authority plays its role well, it can be hoped that desirable benefits may accrue to consumers.

During the two years of initial transition into GST regime, Anti-Profiteering Authority (APA) will step in and may ask businesses that have not passed on full benefits of reduced tax burden to consumers to make up for such benefit, with interest.

The Government is committed to ensure all consumers enjoy the benefit of lower prices of goods and services under GST. Under GST, suppliers of goods and services must pass on any reduction in the rate of tax or the benefit of input tax credit to consumers by way of commensurate reduction in prices. If this is not done, the consumer’s interest is protected by the National Anti-profiteering Authority which may order:

(a) reduction in prices;
(b) return of the amount not passed on with interest @ 18% to the recipient;
(c) imposition of penalty; and
(d) cancellation of registration of the supplier.

Affected consumers may file an application, in the prescribed format, before the Standing Committee on Anti-profiteering if the profiteering has all-India character or before the StateScreening Committees if the profiteering is of local nature.


Though there is a legal provision in the GST law itself to take action against of undue profiteering, Government has taken various steps to ensure action on the part of manufacturers and suppliers so that the benefit is passed on to ultimate beneficiaries, i.e., the consumers. Even on existing stocks lying unsold, there is going to be revised prices put by way of stickers or otherwise. Since old and new (revised) prices would be displayed, a comparison thereof will show the benefit passed on due to lower tax cascading.

Based on the CBEC advisory, it is understood that major FMCG companies have taken positive steps to reduce the prices of goods resulting from cut in tax rates. This is reflected in the recent rate cut announcements in media by companies which has been possible with the use of technology to monitor billing / invoicing at retail level. Similarly, restaurants are also expected to pass on the benefit because of lower tax rate of 5% in place of 18% or 18% with input tax credit. Government had to take this step as restaurants were not passing on the benefit and there were complaints of undue profiteering. Lowering the rate also makes things simple for businesses as well as consumers.

One of the measures to curb undue profiteering could be to take a  eclaration or undertaking from vendors / suppliers that the due benefits accruing to them because of GST have been passed on. In case of large clients such as public sector enterprises or banks or large listed companies, there could even be mechanism of getting verification done by any external agency / internal auditor etc. Alternatively, such vendors or suppliers could be asked to tender a Chartered Accountant / Cost Accountant certificate to this effect. CBEC may also conduct test audits in this regard.

Undue or excessive (more than normal or reasonable profit) is bad, both from ethical as well as legal angle. Further, it is inflationary and does not help anyone except the profiteer itself or himself. Yes, Government’s revenue may also see a little upsurge resulting from higher turnover and profits. Prices ought to be brought down in post GST regime which have otherwise witnessed a rising trend post GST from July, 2017. This is also one of the reasons why Reserve Bank had not reduced the interest rates in this week’s monetary policy review, although GST has been introduced and propagated as non-inflationary tax due to removal of tax cascading.

How inflation has fared post GST in India can be seen in the following graph :

(Source: World Bank, Bloomberg)

It we look at other economies where GST was introduced earlier, the consumer price inflation witnessed a download trend. For example, in New Zealand (introduced in 1991), Singapore (introduced in 1994) and Malaysia (introduced in 2016). However, in Australia, where it was introduced in 2000, there has been a mixed trend with ups and downs.

So far as India is concerned, the main reasons behind inflationary trend are complexities in GST law for anti tax cascading effect, lack of knowledge and availment of correct input tax credit, businesses hiking up the prices just before GST, unethical profiteering by some suppliers, lack of  implementation machinery, hike in tax rates in GST regime for services,
small and unorganized sector not passing on benefits etc. Apart from other reasons, if antiprofiteering measure are implemented properly and monitoring is done properly, it may help curb avoidable inflation, i.e. it becomes crucial for Government today to seriously implement anti-inflationary / profiteering measures.

Government has also recently introduced form for making application for complaint of antiprofiteering by way of a prescribed form called Form APA F-1 which has to be filed before standing committee or state level screening committee as prescribed in Rules. However, the form introduced is very complex and consumers will only be discouraged to file a complaint. Applicant is also required to mention his code, registration number, HSN code, MRP etc. It is a technical form with many annexures. Separate application has to be filed for different type of goods and services. For example, if one has a single invoice for five items, he need to file five forms with copies of invoice(s), proof of identity, price lists, detailed working street etc so much so that even any professional would find it difficult to lodge a complaint.

Applications may be submitted to:
Standing Committee on Anti-profiteering
Second Floor, Bhai Vir Singh Sahitya Sadan, Bhai Vir Singh Marg,
Gole Market, New Delhi – 110001 Tel No. 011-23741537,
Fax No. : 011-23741542, Email: dgsafeguards@nic.in
or
State Screening Committees on Anti-profiteering
Contact details of State Screening Committee on Anti-profiteering
are available at URL : googl/eYJXnK

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Individuals to help out with GST returns at seva kendras

NEW DELHI: The government plans to tap the Central Board of Excise and Customs’ vast network of 4,500 GST seva kendras to help small businesses and individuals, who have to comply with the new regulations and file returns. In the process, it will also deploy thousands of individuals who are undergoing skill training, to become return filers and help others.

The return filers will be on the lines of tax return preparers, who help individuals file I-T returns. Sources told TOI that the new set-up will be in place soon and will also come handy for housewives, many of whom are working as consultants, or those who have let out property for commercial purposes, such as shops.

The move to handhold small traders comes along with a series of steps to simplify the tax regime, which has faced severe criticism due to the multi-stage filing protocol that is seen to be problematic for those used to handing over their bill book to a lawyer or an accountant, who then filed the returns.

Although intermediaries such as suvidha providers are already there, small businessmen seem to have more faith in government-accredited service providers at seva kendras. A recent survey by the tax department showed that businesses in Haryana had suggested that they were willing to pay a small fee to reduce the burden of filing returns. On Friday , the GST Council will take up several proposals to simplify the compliance burden, including filing of returns with invoices by sellers. In the second stage, the invoices have to be confirmed by the buyer, before the final returns are filed and taxes paid. As part of the exercise, the Centre and the states are now planning to mandate quarterly filing, instead of monthly returns, apart from allowing traders, eateries and manufacturers with annual turnover of up to Rs 1.5 crore to pay a flat tax of 1 per cent under the composition scheme.The scheme provides for exemption from filing of details such as invoices. Paying by card or an electronic wallet may fetch you a rebate in payment of GST with the government planning concessions to make the system more transparent and help reduce cash transactions.

Sources said that move is afoot to put in place a mechanism under which individuals may be allowed to pay a lower tax at restaurants and other service outlets along with a discount in tax on consumer goods and durables if they opt for digital payments.

The move comes at a time when the government is under attack for last year’s demonetisation drive, which had stated digitisation as one of the key objectives. While concessions have been provided through a cash back facility for card payments made at fuel retail outlets, the plan has not been extended to other areas despite the tax department’s repeated plea. The introduction of GST was expected to help check evasion but the results have not been encouraging as retailers and services providers such as restaurants and studios are refusing to accept cards and encouraging the use of cash. By introducing an incentive to pay by card, the government is hoping to plug leakages.

The move comes at a time when rates on several goods, especially those in the 28 per cent bracket, are also being slashed. This itself may reduce the incentive to evade taxes.
Source : https://timesofindia.indiatimes.com/business/india-business/individuals-to-help-out-with-gst-returns-at-seva-kendras/articleshow/61587005.cms

Domestic BPOs answer GST call with plans to cash in on tax filings

BENGALURU: The government’s goods and services tax (GST) has opened up a new business opportunity for the business process management sector, which expects to see demand from companies who may need help managing their tax filings and invoice matching processes. The GST regime, which was rolled out on July 1, requires companies to file returns every month in every state in which they do business and also needs invoices to match to allow for tax refunds. The system is geared to prevent tax evasion.

Hinduja Global SolutionsBSE 17.10 % (HGS) has already launched a GST solution in India and has won a telecom customer, which is being supported from Noida, but HGS expects to start operations in Mumbai and Chennai as well. “When the system settles down, everyone will have to start uploading their sales invoice, what they call the GST credit check, input credit taken and do the plus minus — whether they have to pay more or collect a refund. This is a reconciliation exercise at every stage. If there is a mismatch between what you say and what a supplier says, that will throw up an issue,” Srinivas Palakodeti, CFO at HGS, said. “We could manage the process where there are mismatches, it would involve calling up a vendor and pointing out a discrepancy.”

He added that this would be a combination of voice and non-voice services and would be similar to the work already being done by the company in finance and accounting and in payment processing for insurers and hospitals.

BPO CEOs are already looking at how GST could open up new markets for them including with small-and-medium-sized companies that could not typically afford their services.

“One thing we are looking at is seeing if it is feasible to create a multitenant shared-services model for smaller companies. So we could maybe aggregate about 50 MSMEs in a process and then they could split the costs across companies to make it more affordable,” Sandip Sen, CEO of BPO company Aegis told ET. Aegis is one of the largest BPOs in India focused on the domestic market.

But not everyone is convinced that this could be a large long-term opportunity for the domestic BPO sector. “In the short term, yes, everyone is looking for extra help and it is an opportunity for BPO firms but in the longer term, GST is designed for automation. We see that bots will be used as the system settles down.

Companies are even looking at consolidating their finance and accounting operations in a shared services centre, but I don’t know if that will translate into contracts for BPO players, “ Milan Sheth, Partner-Advisory Services & Technology Sector Leader at consultancy EY, said.

“The big companies already have Finance & Accounting teams, so they would be able to manage. It’s the next rung of mid-level companies that would likely be interested. They would not likely go and hire a whole new set of people to do GST filing. We are looking at the space,” Susir Kumar Mangalore, executive chairman of BPO company Intelenet told ET.

Source : https://economictimes.indiatimes.com/tech/ites/domestic-bpos-answer-gst-call-with-plans-to-cash-in-on-tax-filings/articleshow/61568666.cms

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