What is anti- profiteering?

The burden of indirect taxation ultimately falls on consumers. It is expected that the GST regime will result in an increased flow of input tax credit. So, the concern is that benefit of such increased input tax credit may not be passed on to consumers by certain entities.

Anti- profiteering measures mandates that any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed to the recipient by way of reduction in prices.

Ultimately, the motive is that if burden of increased tax is borne by consumer, then, if any benefit arises that should also be enjoyed by consumer.

National anti-profiteering authority

National anti- profiteering authority is therefore being constituted by the Central 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 goods or services supplied by him.

Constitution of the authority

The national anti- profiteering authority shall be a 5 members committee consisting of Chairman who holds or has held a post equivalent in rank to a secretary to the Government of India and four technical members who are or have been commissioner of state tax or central tax for at least one year or have held an equivalent post under any earlier laws.

The authority shall cease to exist after the expiry of 4 years from the date on which the chairman enters upon his office.

Duties of the authority

1. Determine whether the reduction in tax rate or the benefit of input tax credit has been passed on by the seller to the buyer by reducing the prices.
2. Identify the taxpayer who has not passed on the benefit.
3. To order- reduction in prices, return to the buyer, the benefit amount has not passed on along with 18% interest, imposition of penalty and cancellation of registration.
4. To furnish a performance report to the council by the tenth day of the close of each quarter.

Process followed by authority

1. Examination of application by the standing committee and screening committee-
2. The standing committee shall, within a period of two months from the date of the receipt of a written application (extension of one month is possible) from an interested party or from a commissioner or any other person, examine the accuracy and adequacy of the evidence provided in the application to determine whether there is any evidence to support the claim of the applicant.
3. All applications from interested parties on issues of local nature or those forwarded by the standing committee shall first be examined by the state level screening committee. On being satisfied that the supplier has not passed on the benefit, the screening committee will forward the application with its recommendation to the standing committee on anti- profiteering within a period of two months from the date of receipt of a written application. (extension of one month is possible)
4. Initiation and conduct of proceedings-

If the standing committee is satisfied that there is evidence to show that the supplier has not passed on the benefit, it shall refer the matter to the directorate general of anti- profiteering for a detailed investigation. Directorate General of anti-profiteering shall conduct investigation and collect evidence necessary to determine undue profiteering and before investigation, issue a notice to the interested parties.

The directorate general of anti-profiteering can seek opinion of any other agency or statutory authorities in the discharge of his duties.

Directorate general of anti-profiteering or an officer authorized by him will have the power to summon any person either to give evidence or to produce a document or any other thing. He will also have same powers as that of a civil court and every such inquiry will be deemed to be a judicial proceeding.

The directorate general of anti-profiteering will complete the investigation within a period of 6 months. (extension of three months is possible)

Upon completion of the investigation, directorate general of anti-profiteering will furnish to the authority, a report of its finding along with the relevant records.

Order of authority

Where the authority determines that a registered person has not passed on the benefit, the authority may order –

• Reduction in prices
• Return to the recipient, the benefit amount has not passed on along with interest @18% from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be.
• Deposition of amount along with interest @18% from the date of collection of the higher amount till the date of the deposit of such amount to consumer welfare funds.
• Imposition of penalty as specified under the Act and
• Cancellation of registration under the act

Rule 133 (5)

Where upon receipt of the report of the director general of anti-profiteering, the authority has reasons to believe that there has been contravention of the provisions in respect of goods or services or both other than those covered in report then within 6 months authority may direct the director general of anti-profiteering to cause investigation or inquiry.

Penalty

Where the authority after holding examination, comes to the conclusion that any registered person has profiteered, then such person shall be liable to pay penalty equivalent to 10% of the amount so profiteered.

However, no penalty shall be leviable if the profiteered amount is deposited within 30 days of the date of passing of the order by the authority.

Important sections/notifications