Centre proposes anti-profiteering rules to GST Council: New agency with powers to summon

Authority shall be authorised to recommend reduction in prices; orders appealable in high court

Written by Aanchal Magazine | New Delhi | Published: June 4, 2017 1:33 am

The Centre has submitted draft rules for anti-profiteering for consideration of the Goods and Services Tax (GST) Council members in the Council’s fifteenth meeting on Saturday. As per the draft rules proposed under the GST regime, a National Anti-profiteering Authority with powers to summon a person whose attendance is considered necessary, in line with judicial proceedings, has been suggested, sources said.

When it determines that a registered person has not passed on the reduction in tax rate or input tax credit benefit to the recipient, Authority shall be authorised to recommend a reduction in prices, return of the amount equivalent to the amount not passed to the recipient and recovery of the amount including the interest recommended to be returned and deposited in the Consumer Welfare Fund, as provided under Section 57 of CGST Act.

The orders under the anti-profiteering rules shall be appealable in high court, as per the draft rules. The members shall have the powers to summon any person considered necessary to produce document of evidence under Section 70 of Central GST (CGST) Act and shall have powers in any inquiry as provided in case of a civil court under the provisions of the Code of Civil Procedure. The inquiry by the anti-profiteering authority shall be deemed to be judicial proceedings within the meaning of section 193 and section 228 of the Indian Penal Code, as per the draft rules.

Section 171 of the CGST Act provides that 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 (consumer) by way of a commensurate reduction in prices. After the GST Council meeting on Saturday, finance minister Arun Jaitley said that the Council has agreed to set up a Committee comprising officials from Centre and states to look into the complaints with regard to the anti-profiteering provision in CGST Act. The setting up of the Committee is part of the draft anti-profiteering rules that have been submitted to the Council for its approval. Following the approval of the rules by the Council, the draft rules shall be put in public domain and after the feedback, shall be again brought back to the Council for the final approval.

As per the draft rules, the Committee of Central and state government officers shall be authorised to pass orders pertaining to anti-profiteering. The draft rules also state that the Authority, on receipt of a written application, can initiate proceedings to determine whether any reduction in tax rate on any supply of goods or services or benefit of input tax credit has been passed to the recipient by way of commensurate reduction of prices. However, the Authority is not supposed to initiate the proceedings pursuant to the application unless it examines the accuracy and adequacy of the evidence provided in the application.

Also, any order passed by the Committee has to be immediately complied with by the registered person failing which the proper officer shall proceed to recover the amount under the provisions of the CGST Act.

It is proposed that the Authority may require the Directorate General of GST Intelligence or any other agency notified by the Centre or states to conduct investigation for evidence necessary to determine if the reduction in tax rate has been passed on to the recipient. The draft anti-profiteering rules also state that if the members of the anti-profiteering authority differ in opinion, then decision shall be decided by majority.

Last month, after the fourteenth GST Council meeting, Revenue Secretary Hasmukh Adhia had said that even if the machinery for anti-profiteering takes time to be ready after GST implementation, they will have the right to call for information of change in prices retrospectively. “The machinery for the anti-profiteering authority may not be ready at present but any change in prices will be called into be questioned,” Adhia had said, adding that any fluctuations in prices will be closely monitored.

He had also said that the GST Council has ensured that the effective tax incidence under GST remains lower than the existing total effective tax incidence at present and therefore, companies should pass the benefit of gains from input tax credit to consumers. The industry has already raised concerns about the anti-profiteering clause in GST laws, saying that it is open to misuse and subjective interpretation as it is difficult to measure how much would amount to commensurate reduction in prices with respect to a lower tax incidence.

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