With the National Anti-Profiteering Authority being established, the Confederation of Indian Industry (CII) has called for greater clarity in rules to curb price increase arising from GST. Practical implementation of the regulations without ambiguity and without untoward scrutiny is required, particularly in the initial days of implementation till the system stabilizes, said a CII press release.
The anti-profiteering clause was necessitated to keep a check on unethical high profits, analyze long term effects of GST rollout, control price rise and retain consumer trust in the new tax regime. The rules say, “benefit of input tax credit should have been passed on to the recipient by way of commensurate reduction in prices." However, as this definition is not clear, discretionary bias may creep in, pointed out CII.
According to CII, several factors contribute to pricing decisions, such as supply and demand conditions, supplier’s cost and taxes. Pre-GST and post-GST profits may be influenced also factors such as lower logistics costs and free flow of goods and services across states, elimination of certain taxes, and better efficiency. The anti-profiteering clause of GST law should provide clarity on rules and regulations regarding assessment of valuation and impact of taxes.
The anti-profiteering clause could lead to hardship for small enterprises in particular, note CII. There is concern that practical and procedural challenges may be faced during the initial implementation period of the anti-profiteering clause.
Tax authorities will need to be sensitive to natural business outcomes and avoid undue harassment. Also, the clause gives relatively less time for preparation and adoption of the new provisions.
Another challenge is complicated compliance. Government would need to compare cost of every product pre-GST and post-GST to determine the amount of tax benefit applicable. Manufacturers or suppliers may also deal in several products that are not distinguished in their accounting books, so that determining price margins for individual products will be difficult.
While the objective of the anti-profiteering rules is logical and industry is willing to comply, implementation is challenging. Effective anti-profiteering provisions that are clear are needed to ensure GST provides tax benefits to consumers, stressed CII.