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    2018 91 Taxmann Com 401 Article

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    Amandeep Malik
    The document discusses the concept of anti-profiteering in Indian goods and services tax (GST) law. [1] It established the National Anti-Profiteering Authority (NAA) for two years to ensure tax reductions and input tax credits are passed on to consumers. [2] The NAA can ask non-compliant businesses to lower prices, return benefits to buyers, impose penalties, or cancel registrations. [3] However, enforcing anti-profiteering will be challenging as the concept has not succeeded in most countries where implemented.

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    2018 91 Taxmann Com 401 Article

    Uploaded by

    Amandeep Malik
    21 views3 pages
    The document discusses the concept of anti-profiteering in Indian goods and services tax (GST) law. [1] It established the National Anti-Profiteering Authority (NAA) for two years to ensure tax reductions and input tax credits are passed on to consumers. [2] The NAA can ask non-compliant businesses to lower prices, return benefits to buyers, impose penalties, or cancel registrations. [3] However, enforcing anti-profiteering will be challenging as the concept has not succeeded in most countries where implemented.

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    The document discusses the concept of anti-profiteering in Indian goods and services tax (GST) law. [1] It established the National Anti-Profiteering Authority (NAA) for two years to ensure tax reductions and input tax credits are passed on to consumers. [2] The NAA can ask non-compliant businesses to lower prices, return benefits to buyers, impose penalties, or cancel registrations. [3] However, enforcing anti-profiteering will be challenging as the concept has not succeeded in most countries where implemented.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    21 views3 pages

    2018 91 Taxmann Com 401 Article

    Uploaded by

    Amandeep Malik
    The document discusses the concept of anti-profiteering in Indian goods and services tax (GST) law. [1] It established the National Anti-Profiteering Authority (NAA) for two years to ensure tax reductions and input tax credits are passed on to consumers. [2] The NAA can ask non-compliant businesses to lower prices, return benefits to buyers, impose penalties, or cancel registrations. [3] However, enforcing anti-profiteering will be challenging as the concept has not succeeded in most countries where implemented.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    [2018]

    91 taxmann.com 401 (Article)

    [2018] 91 taxmann.com 401 (Article)


    Date of Publishing: March 20, 2018

    Anti – profiteering – A concept in GST Law

    RADHIKA SINGHAL
    Senior Manager – Compliance L.B. Jha & Co.

    GST law has introduced the concept of anti-profiteering. Any reduction


    in GST rate or benefit of input tax credit should be passed on to the end
    consumer and not retained by the business. This is the basis of anti-
    profiteering provisions under GST.

    The Government of India has set up a National Anti-Profiteering


    Authority (NAA) for a period of two years to ensure that the benefits of
    tax reduction and tax credits are passed on to the consumer. The Anti-
    Profiteering Rules lay down details about the selection of the members
    of the NAA and the other committees that will assist the NAA in
    investigating the complaints, the procedure to be followed in
    investigations and the powers given to the authority. Once the
    registered entity, which has profiteered illegally, is identified, it can be
    asked to reduce prices or return the benefit amount to the buyer. The
    authority can also impose penalty or cancel its registration. Though it
    sounds simple, enforcing it will be a tall order especially when anti-
    profiteering law has not been a success in most countries in which it
    has been implemented. Currently no act or rules provide any specified
    modus operandi to pass on the benefit of reduction in net tax to the end
    customer. This has already created a dilemma. This task has been left
    to the NAA. This may result in numerous litigations.

    The Government of India has already issued few notices to enforce this
    anti-profiteering law. Notices have been issued to Hindustan Unilever
    Limited, a particularHonda dealer, Hard castle Restaurants,
    McDonald's franchisees for West and South India and retailer Lifestyle.
    HUL has earmarked Rs. 119 crore in the December quarter to be paid
    to the government because it could not immediately lower prices after
    GST on several products was reduced from 15th of November. The
    company has offered to release the money to the Consumer Welfare
    Fund, run by the department of consumer affairs. In response, the
    authority has sought clarifications from HUL on the methodology used
    to arrive at Rs. 119 crore that the company offered to the government.
    Now, other large companies are also considering making similar
    provisions with appropriate documentation as HUL because they were
    also unable to cut prices immediately following the GST reductions.

    This concept of anti-profiteering is not exactly unique. There is a legal


    concept of unjust enrichment which refers to a situation in which one
    person is enriched at the expense of another in the circumstances
    which the law treats as unjust. In the earlier excise law, unjust
    enrichment was introduced in the year 1991 by amending Section 11B
    .This amendment required that if the manufacturer has charged excise
    duty to his buyer, it was established that he had passed on the burden
    to the buyer and had already recovered duty from such buyer. In such
    cases, refund of excise duty paid to the manufacturer would have
    amounted to excess and undeserved profit to the manufacturer.
    Principles of unjust enrichment were laid down by Hon'ble Supreme
    Court in the case of Mafatlal Industries Ltd. v. Union of India 1997 (89)
    ELT 247. The principle of unjust enrichment was later on invoked in all
    the refund cases. While granting refund in GST law as well, courts will
    assess the case through the test of unjust enrichment. The concept of
    anti-profiteering is parallel to principle of unjust enrichment. In other
    words we can say that unjust enrichment in profit is under curb
    through anti-profiteering provision in GST.

    In the VAT Laws of countries around the world the concept of Anti
    profiteering is not widely prevalent. Such a concept is found only in
    Australia, Malaysia, Canada and New Zealand. Major counties such as
    United States, United Kingdom and other European countries do not
    have this concept in their VAT Laws. It may also be noted that in past
    there has been a concept of Excess Profit Tax in many countries
    including India. In India, this tax was first levied during World War 1 in
    1919 and the second time during World War II from 1940 to 1948.In
    the peace- time budget, for 1946-47, the Finance Minister announced
    complete abolition of the Excess Profit tax earned after 31 March,
    1946. Such legislation has not been continued for long as there were
    mostly extraordinary measures in special circumstances.

    In this perspective, how does one justify the present concept of anti-
    profiteering in a free market economy? Are we going back to the days
    of price control? If the benefits of input tax credit are not passed on to
    the consumer the result will be charging of excessive prices. Will this
    not inhibit consumer demand? In the Indian economy in which
    practically in every sector competition exists and price discovery is not
    complicated, is it not better than the market mechanism should correct
    wrong trade practices? On the other hand if the manufacturer or the
    trader considers the benefits of the input credit in the price calculation
    and lowers prices in line with GST laws and then later decides to raise
    prices – how can that be stopped except by the interplay of competitive
    market forces?

    In an era in which government interference in an open market is


    discouraged except in extraordinary circumstances, is there any
    requirement for the Anti-Profiteering laws?

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