ANTI-PROFITEERING CLAUSE

 

Rationale for Anti-Profiteering Provisions

Invariably all the countries implementing GST have faced sudden rise in inflation and the profiteering practices followed by business community were alleged as one of the reasons for rise in inflation Learning from the global examples, Anti- Profiteering measures have also been inserted in the Indian GST Law.

Section 171 — Anti-Profiteering Measure

This is one of the most dangerous provisions. This provision was brought in for the first time through revised model GST law that was released on 26th November, 2016. Reason of adding such clause to provide a security and assurance to the consumer that whatever benefit a businessman would get after the implementation of GST, that is not available to him in the previous Indirect Tax regime, need not be retained by him over and above his normal margin because this benefit whether because of reduction of tax rates or availability of input tax credit does not belong to him and if he is allowed to retain the same this will be an injustice to the end customer.

He is not entitled to such benefit as this will be an extra benefit or profit for him whereas it will be a loss for the consumer. Therefore it could be said that anti-profiteering measure gives a reason to smile to all the consumers under GST because those benefits will have to be passed to them.

Section 171 — Anti-Profiteering Measure
(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.	(3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed

The Central Government is empowered to constitute Authority (‘National Profiteering Authority – “ NAA” or “ Authority”) to examine whether input tax credits availed by any registered person or the reduction in the tax have actually resulted in the prices of the goods or services or supplied by him.