Tax Experts react to Anti-profiteering Rules as approved by GST Council

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The Anti-profiteering Rules released by Govt. last week have only added to India Inc’s worries, leading to an apprehension if the same would lead to witch-hunting by the Taxmen. While the intent is to curtail inflation post GST implementation, we can just hope that the provision prescribing deregistration would be used sparingly.  
Tax Experts react to Anti-profiteering Rules as approved by GST Council


Jigar Doshi
SKP Business Consulting LLP

Many countries around the world have attempted to introduce strong anti-profiteering measures during their GST implementation phase. Anti-profiteering measures certainly act as a check on business organizations, which are reluctant to pass on the benefit of GST to the end consumer, leading to temporary inflation in the prices in the short run.

The Anti-Profiteering Rules announced by the government, certainly brings in some clarity regarding how the government will perceive ‘what shall be construed as profiteering’ and ‘what shall not be construed as profiteering’? However, unlike other countries which have introduced anti-profiteering measures in the past, the Indian anti-profiteering rule does not propose any ‘Ad-hoc formula’ or set ‘mechanism’ to ascertain unreasonable or high profit. Rather it proposes a subjective ‘case to case’ scrutiny of selected applications, which shall be conducted by the National Anti-profiteering Authority with the help of Director General of Safeguards.

Such subjective scrutiny of profiteering cases clearly manifests Governments intent, that it is not interested in going behind every business organization that may have appropriated their prices in response to GST. Rather the objective seems to be to ‘selectively identify cases’ that seem to be grossly non-compliant with the anti-profiteering clause provided under the GST Legislation.

Furthermore, while the rule mentions that that Anti-Profiteering Authority to issue order within 3 months of receipt of report from Director General (Safeguards), the overall activity may probably take 8-10 months for a selected anti-profiteering case to reach its conclusion. As a whole it appears that these rules will empower the government to take strict actions against defaulters who are convicted by the Authority, but the ‘case to case’ approach of scrutinizing cases will certainly limit its wider reach of controlling inflationary pressure on prices in the short run.