DEMYSTIFYING ANTI-PROFITEERING IN GOODS AND SERVICE TAX

Anti-profiteering is introduced in the GST Act based on the experience gained at the time of implementation of VAT in India and all other countries where GST / VAT is rolled out. The Government across the nations felt that the until and unless there is a provision in the law the benefits of the new tax regime are not being passed.

The benefit of the ITC is clearly evident in the MRP based goods, the prices are fixed based on the assumption that in the erstwhile tax regime Central Excise Taxes are not eligible for Input Tax Credit but with GST all the taxes are eligible for the ITC across the supply chain cycle, this means that ITC on the taxes can be claimed at all stages of supply. Say for example, Central Excise taxes were not eligible for ITC by the wholesaler or distributor or the end retailer, therefore Central Excise duties were part of the MRP but in GST, all the taxes are eligible for ITC, so the MRP’s have to revisited and reduced accordingly. Recently we have seen a case where one of the major FMCG company has not passed on the rate reduction, the company has paid Rs 119 crores as fine.

It is really a herculean task but not an impossible task to determine the reduction of the cost on account of additional ITC in the supply chain, reduction of taxes and taxes subsumed in GST.  Many of the taxpayers are of the assumption that there is no change in the pricing as they were taking ITC in the erstwhile tax regime and now also, but they have to look beyond then only come to a conclusion. The reduction in the MRP can be used and widely publicized as in the Australian Model where it is required to show the pre-GST and post GST Prices. Though display of dual MRP is not a mandatory feature in GST, the same can be used and shown predominantly on the goods. Adhering to the provisions of the anti-profiteering is also part of the corporate governance.

Let me explain the same with a small illustration practically A Ltd and B Ltd are two manufacturers of a health dink brands H and I.  A decided to reduce the price of the product H and use the Australian Model of dual GST and whereas B Ltd has not reduced the price as it did not consider the same to be required. In the departmental stores both the brands H & I are placed in the same rack. When the customers walk in to buy the health drink, he is attracted to brand H as he says the price is being reduced and also following the compliance even though he is using the brand I for a long time. The loyalty of the customer shifts from the brand I to brand H of company A Ltd.

This is one of the products I have seen in the departmental store for the reduction of the GST, this is how this company is publicizing the price reduction.

It is a known fact that cost of acquisition the customer is very high and retaining the customer is also high. Here the cost benefit analysis is also not required as it is a statutory obligation and also as part of the corporate governance it has to adhered.

Anti-profiteering as seen is not anti-business but it can be used as a tool to improve the market share and profitability on account of volumes and lesser spend on the marketing costs. This benefit is available only for the corporates who act proactively and the early adopters.

It is known to all that the Director General of Safeguards has issued notices to companies and the investigation is in under process. In today’s dynamic world any negative news on the brand or the company will have an immediate impact on the sales and could also impact the profitability as well as the market capitalization if listed in the exchanges.

As part of the corporate governance and statutory obligations in the GST Act, any reduction in the rates or the availability of the Input Tax Credit has to be passed to the end customer.

The author can be reached for any further clarifications on the same on the mail id mallikarjunagupta@india-gst.in

Any views or opinions represented above are personal and belong solely to the author and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.

All about E-waybills, Refunds and Anti-Profiteering provisions in GST

About The Event

India-gst.in is coming up with a series of sessions on latest changes in GST and as part of it, the first session is being held in Hyderabad on 7th March 2018. Eminent speakers are being invited to address the sessions. 

It will be useful to executives, professionals and key decision makers in the organization as the topics covered are of primary importance under GST like E-waybills, Refunds and Anti-profiteering provisions in GST.

Session – 1  E-waybill by MR. ROHIT KUMAR SINGH, Indirect Tax Consultant

E-waybills for an interstate movement of goods above Rs 50,000 under GST using the central portal. Topics to be covered are

• Introduction of e-Way Bill
• Why is e-Way bill required
• When should e-Way Bill be issued?
• Cases when e-Way bill is Not Required
• Who should Generate an e-Way bill
• States that have Notified e-Way Bill
• Processes involved in generation of web-based e-Way Bill
• Practical demo of E Way Bill generation – Thru excel tool
• Validity of e-Way Bill
• Documents required to generate e-Way Bill
• Enabling the various modes of the e-Way Bill generation
• Physical check on e-Way bill

— Lunch Break —

Session II – Refunds by CMA Bhogavallli Mallikarjuna Gupta, Founder India-gst.in

• Refunds – Law and documentation
• Refund on excess balance in electronic credit ledger
• Refund on export of goods and services with payment of IGST
• Refund on export of goods and services without payment of IGST
• Refund on deemed exports
• Refund on supplies to SEZ – with/without payment of duties

Session III – Anti Profiteering by CMA Bhogavallli Mallikarjuna Gupta, Founder India-gst.in

• Anti-Profiteering Meaning
• Rules
• Documents to be verified

The venue will be announced shortly as our logistics partners are working on it to provide the best experience.

About Speakers

 

Mr. Rohit Kumar Singh

Head GST Suvidha Provider – Karvy Data Management Services Limited

Co-authored a book on Company Law Matters

Speaker – ASSOCHAM, FTAPCCI, Industry associations, T-HUB, 91 Springboards, ICAI, ICMAI, Calcutta Management Association, etc.

Faculty for Indirect tax for ICAI and GST Certificate course for ICMAI

CMA Bhogavalli Mallikarguna Gupta
Advisor, Speaker, and Author on Indian GST
Founder and Chief Editor of http://www.india-gst.in
Director – Business Advisory Services, Procode Softech Pvt Ltd
Resource Person – ICAI Taxation
Special Invitee – GST and Customs Committee at FTAPCCI
National Advisory and Governing Body member at MSME World

Anti-Profiteering

The government has released the formats for the consumers to file a complaint under GST against the taxpayers in case if they have not reduced the prices after the rollout of GST on account of the reduction of tax rates or input tax credit is available, previously not available.

Format for filing of the complaint about Anti-Profiteering

Anti Profiteering Mechanism flow chart

Anti Profiteering Screening Committee at the States and UTs

GST Tip – 411

As per Section 171 of the CGST Act, any reduction in the tax rate or additional benefit of the input tax credit has to be passed to the recipient under Anti-Profiteering.

Government appoints Shri B.N. Sharma (IAS:1985) as Chairman of the National Anti-profiteering Authority under GST

In an immediate follow-up action of last week’s Cabinet approval for creation of the posts of Chairman and Technical Members of the National Anti-profiteering Authority under GST, the Government today issued orders appointing senior IAS officer Shri B.N. Sharma, as the first Chairman of this apex Authority in the rank of Secretary to Government of India

For more information click here 

 

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Demystifying Tax Deduction at Source under GST Act

In the current tax regime under VAT, we have Tax Deducted at Source, and the same is being continued under GST also. Section 51 of the Central Goods and Service Tax Act, 2017 talks about the provisions related Tax Deduction at Source. TDS is applicable to works contract also related to immovable properties in GST.

TDS is applicable on works contract also and the definition of works contract is defined in subsection 119 of section 2 of the CGST Act 2017.

works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;

The tax has to be deducted by category of persons as given in the sub-section 1 of section 51 of the CGST Act 2017.  The category of persons are

(a) a department or establishment of the Central or State Government, or

(b) Local authority, or

(c) Governmental agencies, or

(d) such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council,

Point “d” is an open clause and government on recommendations of the GST Council will notify the class of persons who are required to deduct TDS under GST from time to time whenever it finds that there is a necessity to plug the revenue leakage in the system.

The tax has to be deducted only in case of contracts where the contract value exceeds Rs 2.5 Lacs by the taxpayer who has issued the contract.

TDS should not be deducted if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.

For deriving the value of supply for determining the TDS, is the value of supply excluding the taxes paid under GST (Central Tax, State / UT Tax and Compensation Cess).

The tax so deducted has to be deposited by the deductor by 10^th of next month by filing of GSTR – 7

The deductor has to issue a certificate to the deductee, the contractor from whom the tax is deducted with the details like the amount of contract, the rate of tax deducted, amount of tax deducted and amount of tax deposited by the deductor in GSTR – 7A.  The deductor has to issue a certificate within 5 days from the date on which the amount is credited, a late fee of Rs 100 will be levied per day for delay in issue of the certificate. The amount of late fee will not exceed Rs 5000.

The deductee can take the credit of the tax based on GSTR – 2 filed by the Deductor under Section 39, sub-section 3 of CGST Act 2017. The amount will be credited to the electronic cash ledger of the deductee, and he can utilize the same for payment of GST taxes.

In case if the deductor fails to deposit the tax to the respective government, he is liable to pay interest on the defaulted amount as per provisions of Section 50 of CGST Act 2017.

The deductor can claim for refund as per Section 54 of CGST Act 2017 provided that the amount is not credited to the electronic cash ledger of the deductee.

From the provision of this section, it is clear that the government does not want to lose any tax revenue from the small contractors also. One silver lining is that unlike in tax collected at source there is no matching of records to avail the credit. If the contractor wants to avail in the credit, then he has to be registered with GST. In a way, the government is ensuring that there is no revenue leakage from any transactions at any given point of time.

The tax rates with respect to works contract have been reduced from 18% to 12% wide Notification No 20 CGST (Rates) 2017 with respect to composite contracts undertaken for the Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration. These rates are in addition to the TDS rates. In the erstwhile regime, the contractors were billing under the composite scheme where they were not taking input tax credit, and the excise taxes were added to the cost of the project along with the VAT and Service Tax. But now going forward in GST, as input tax credit is available for all the inputs if used for the furtherance of the business, this means that pricing of the existing contracts has to be re worked to take the benefit of the ITC and it is required as part of the Anti-profiteering provisions of the CGST Act. It will be very tough to say on the face of it that the cost for all the contract will be coming down, it has to evaluated on case to case basis and if there is no remarkable reduction or increase in costs due to lower tax rates on the input supplies. This is most likely to be seen in the case of construction of roads as the major component is gravel which is taxed at 5%, bitumen @ 9%, labor if on pay roll the GST is not applicable as it is part of the wages. Each and every contract has to be evaluated, and price revision has to be carried out accordingly. GST is exempted for some contracts as given in Notification No 12 CGST (Rates), 2017. The prices for contracts falling under such contracts also have to be renegotiated as ITC is not available on inputs.

The rollout date for the TDS in GST will be notified by the government separately, and before that, all the deductors have to obtain new GST registration number for TDS separately. The process of registration for TDS will commence from 18^th of September 2017 based on the press release issued after the 21^st GST Council Meeting held on 9^th September 2017 at Hyderabad.

Any views or opinions represented above are personal and belong solely to the author and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.

Sale of bottled water on same rate Post GST

On account of implementation of GST there may be instances where the retail sale price of a pre-packaged commodity is required to be changed. Department of Consumer Affairs has therefore issued an advisory on the matter.

Further, vide this advisory it has been informed inter alia, that for reducing the Retail Sale Price (MRP), a sticker with the revised lower MRP (inclusive of all taxes) may be affixed and the same shall not cover the MRP declaration made by the manufacturer or the packer or importer, as the case may be, on the label of the package, which includes the packed water bottles also.

The said information has already been disseminated to all the Controllers of Legal Metrology of all States/ UTs for immediate necessary action.

Further, Section 171 of the GST Act provides that:

(1) 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.

(2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, 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 the goods or services or both supplied by him.

This information was given by Shri C. R. Chaudhary, the Minister of State for Consumer Affairs, Food and Public Distribution, in a written reply to a question in Rajya Sabha, today.

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AK
(Release ID :169227)