Days after tax rates of about 178 products under goods & services Tax (GST) were changed, the government could be looking to come out with detailed anti-profiteering guidelines, according to three people close to the development. 

The broad idea is to prescribe a methodology to ascertain whether companies are passing on the tax reduction under GST and benefits derived from input tax credits to consumers. The guidelines could come by December first week, according to the people in the know.

Several experts — in the government and tax advisors — have been raising several hypothetical questions around the anti-profiteering clause of the GST. Can a company pass benefits of the recent GST rate reduction on one brand of bodywash to another brand of bodywash? Can the company cross subsidise reduction in GST rates in bodywash to something else it sells, say hair oil? 

The government’s reference point for arriving at the anti-profiteering rules is two countries, Australia and Malaysia. The anti-profiteering methodology prescribed by Malaysia focused on product-wise pre- and post-GST net profits of companies. The Australian method focussed on pre-GST and post-GST price changes among other things. 

In the last few days, most companies have also rushed to tax experts to know how they can pass on the benefits to consumers. Some of the doubts are around whether cross subsidising one product with another will be permitted and the duration in which the benefits have to be passed on to the consumers. 

Tax experts say in its current form antiprofiteering norms could be challenged in court if any demand is made. They add that compliance cost of companies should be taken into account while determining anti-profiteering. In Australia and Malaysia, compliance cost is deducted from total benefits to be passed on to customers. 

People in the know said the government has formed a five-member National Anti-Profiteering Authority (NAPA) which is required to scrutinise businesses and determine where companies are not passing on benefits to customers. The government is also seeking NAPA officials’ inputs to arrive at a methodology for anti-profiteering. 

 

Source: Economic Times

 

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