Beware!! Anti-Profiteering measures gains momentum

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As the assessments and scrutiny for GST regime are in full swing across the nations, especially post pandemic disruptions, the Anti-Profiteering measures are gaining its momentum. Section 171 underpins this measure for "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."

For the purposes of this section, the expression “profiteered” shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services or both

Lets look at some of the recent interventions in these lines.

(A) In the case of M/S. ANUTONE ACOUSTICS LTD (the Respondent) ,  The National Anti-Profiteering Authority finds that, the supply of goods by the Respondent to the Applicant no. 1 was made as per the order placed during February 2017 on the prices agreed as per the offer of the Respondent given during November 2016. In such offer and quote, the amount of Additional Duty of Customs (referred as CVD), payable at the time of import and on which no ITC was then available, was necessarily factored into the prices. As per the mandate of Section 171 of the CGST Act, 2017, if the benefit of ITC, which was not available earlier, was made available to the Respondent in the post GST period, it was incumbent on the Respondent to pass on such benefit to the Applicant no. 1 by commensurate reduction in price.

The Authority also finds that, such discounts were offered to increase the sales of the Respondent in the normal course of their business which do not constitute passing on of the benefit which accrued to the Respondent on account of availability of ITC of IGST paid at the time of import during the GST period. The Respondent is legally bound to pass on the above benefit through commensurate reduction in prices. Hence, the Authority holds this contention of the Respondent devoid of any merit

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(B) In case of M/S. THECO INDIA PVT. LTD. VERSUS THE SECRETARY, THE NATIONAL ANTI-PROFITEERING AUTHORITY, THE DIRECTOR GENERAL OF ANTI-PROFITEERING, NEW DELHI, The writ petition raises a challenge to a notice issued by the National Anti- Profiteering Authority (Authority)/R1 dated 10.07.2020 in consequence of a Report of the Director General of Anti-Profiteering (DGAP)/R2 dated 01.07.2020. The petitioner, a trader in goods viz., dental equipments and accessories, challenges the aforesaid order on various ground, specifically, that the power of suo moto investigation in terms of Rule 133 of the Central Goods and Service Tax Rules, 2017 (‘CGST Rules’) was available to the Authority only with effect from 28.06.2019.

Rules 133 (4) & (5)(a), no doubt, expand the scope of power vesting in the Authority to enquire, adding the dimension of suo-moto review, thereto. However, and bearing in mind the object of anti-profiteering measures, Hon'ble Madras High court not inclined to accept the submission of the petitioner to the effect that the Rules are prospective in operation and will not be applicable in respect of complaints filed and enquiry commenced prior to the date of insertion of the rules. In their considered view, with the coming into force of GST on 01.07.2017 and with it Section 171, every conceivable effort to contain profiteering must be made be available to the Authorities and the Rules merely arm and equip the officers with the necessary ammunition to address the issue effectively

The Competition Act addresses anti-competitive agreements and has a laudable purpose behind it. The object is to ensure healthy competition in the market as it is expected to bring about various benefits for the public as well as the economy. This is similar to the Anti-profiteering provision and the spirit and object behind its insertion. The distinction sought to be made by the petitioner is thus rejected. The cases relied upon by the petitioner are distinguishable for this reason

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If taxpayers wonder how would department get to know this, well, their customers can file application with The National Anti-Profiteering Authority for appropriate interventions. These interventions truly makes GST law an enabler.

- LDR

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