ANTI – PROFITEERING – A LAW TO CURB UNJUST PROFIT
The biggest tax regime change occurred with transition from Excise & Service tax to Goods & Services Tax (GST) in India.
The change was so dynamic that it could lead to boosting the GDP of India and also result in changes in price of goods and services as well. The business transactions saw different trend.
A prominent change was the introduction of anti-profiteering. The intention is that no business should take undue benefit of such change in taxation regime.
The macroeconomics of pricing of goods and services are under scan for the first time in India. The focus of the Government of India is that if there is a reduction in tax, then the benefit of reduction should be passed over to the consumer.
With anti-profiteering being introduced, no business can retain any benefit or profit accrued due to reduction in tax and ultimately leading to reduction of its price of goods or services.
I can say that “unjust enrichment in profit is under curb by anti-profiteering measure”. In other words, entire supply chain is under scan of the lens.
It is also a step towards checking of inflation due to changes in pricing with the onset of new tax regime of GST.
The machinery provision to regulate anti-profiteering is under Section 171 of CGST Act which states 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 by way of commensurate reduction in prices.”
On perusal of the same, it should be realized that word deployed is “recipient” and it conveys a lot and it is going to safeguard the interest of every person in the supply chain as a recipient.
B2B or B2C
There are two schools of thought thriving upon the word “recipient”. One says it is not for B2B and other says B2C. Before it can be safely concluded as to what actually it is meant for, the framing of the Section 171 and words deployed thereunder need to be perused again.
A broader word i.e. “recipient” has been used in the body of Section 171 of the Act. Further, neither “customer” nor “consumer” existed.
Hence, it is as clear as day light for one to conclude as to whether the intention is B2B2C or B2B or B2C or otherwise.
Passing of Benefit
The passing of benefit should occur with every reduction in tax rate or due to benefit of input tax credit.
The passing of benefit has been also implemented by other ministry to align it with declaration of every price reduction or enhancement by way of an advertisement in public domain.
The label showing pricing has been also monitored. The disparity in pricing has also been brought to the notice by various vigil citizens.
Various committees have already been working on artificial intelligence for certain sensitive sectors. They have already worked on various factors including the macro elemental aspects of pricing after change in rate slabs for various goods and services.
The reduction of prices in many sectors and statics has already been tabled and actions are being initiated at every possible level.
Practically it is very difficult to establish one to one correlation between ITC on inward supplies and Tax payable on outward supplies.
However, Companies as well as concerned anti-profiteering authority will have to deploy a holistic approach in screening of the margins and inbuilt factors towards the prices of supply. They have to focus on 3 factors:
Profit on product in absolute terms.
Profit percentage on Cost of product.
Profit percentage on Sale Price.