With only 8 days to go for pan-India GST rollout, businesses are facing a nightmare in the form of ‘Anti-Profiteering’ laws, which were launched early this week.

Under this law, businesses can be closed down by Govt., if it is found that they are not passing on the benefits of lower tax slabs to the consumers.

Now, this can become tricky, considering the scope and extent of GST, covering every product and service being sold in India.

Will it lead to tax terrorism in India?

GST’s Anti-Profiteering Laws Or A Nightmare?

A 5 member National Anti-Profiteering Authority, headed by a secretary-level officer has been proposed under Anti-Profiteering Laws, which will come into effect from July 1st. This has been provisioned under Section 171 of the CGST Act.

This committee can force any business establishment to reduce the price of any product or service, if it is reduced under GST. Besides, under the law, every business establishment has been mandated to return the difference in pricing charged from the customer immediately.

If not returned, then the Committee can impose 18% interest besides penalty as deemed.

In case the consumer is not identified, then the Committee can use Consumer Welfare Fund as provided under Section 57 of CGST) and SGST) Acts, and deposit the difference of amount, and interest charged in a welfare fund.

This committee has been provided a life-time of 2 years, and every complaint has to be forwarded to Director General of Safeguards for observation.

As per the rule under Anti-Profiteering laws, “The Authority shall, within a period of three months from the date of receipt of the report from the Director General of Safeguards determine whether a registered person has passed on the benefit of reduction in rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices,”

Will This Lead To Tax Terrorism?

As per some experts of Tax and Accounting, such ambiguous and half-baked anti-profiteering laws can induce chaos and confusion among the business community.

In fact, this can lead to tax terrorism, and witch hunting of special cases, without any provocation.

For instance, a competitor can suddenly reduce the price of a commodity, and then complain to the GST Authority, that a particular business is making undue profits from GST Tax slabs.

Besides, there are so many factors which can actually affect the pricing of a commodity, such as supply and demand conditions, cost structure of the supplier, and geographical location of the marketplace and hundreds of more.

Any one factor can reduce or increase the price of a product, and it won’t be humanly possible to monitor the difference between pre-GST and post-GST rates.

Such anti-profiteering laws were introduced in Malaysia, and it proved to be a disaster, as it led to tax terrorism, all over the nation.

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