Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
 
Open DEMAT Account with in 24 Hrs and start investing now!
« GST - Goods and Services Tax »
Open DEMAT Account in 24 hrs
 State government extends due date for filing GST returns for November
 GSTN Introduces the e-Invoice Verifier App: All You Need to Know
 Income tax return filing: What is ITR 1 Sahaj form? Check eligibility and steps to file online
 GST council may consider setting up tribunal for indirect tax litigation
 GST Council may lower tax on health insurance
 GST Annual Return: CBIC amends GSTR-9 to Allow IRC Claims and Amendment of Invoices till 30th Nov
 GST (Tax) E-invoice Must For Businesses With Over 5 Crore Annual Turnove
 GST Portal Releases Module-wise New Functionalities deployed on the Portal for Taxpayers
 GST on betting and gambling: Tax structure and liabilities in case of default
 Budget to reset tax laws to decriminalise sections in I-T, GST: Finance Ministry
 In relief to tenants, AAR allows tax credit on GST paid on upfront lease premium

Firms may get to raise prices after transferring GST cuts
August, 07th 2019

Companies are free to raise prices of products and services as per their business cycle without fear of getting caught in the anti-profiteering provision in the Goods and Services Tax (GST) law once they have passed on the benefit of tax rate cuts to consumers, said a government official.

The clarification from the official, who has knowledge of how the National Anti-profiteering Authority (NAA) and its investigative arm work, comes at a time when ambiguity in the law and the recent extension of the profiteering watchdog’s tenure as well as an increase in penalty for violation have led to concerns that the pricing liberty of businesses stands curtailed.

Analysts said that due to lack of guidelines on how to implement anti-profiteering provisions in the Central GST Act, companies are not sure how long they are expected to maintain a price after they reduce price to pass on the benefit of a tax cut to consumers. This is also worrisome for companies that have faced charges of profiteering for specific periods in the past. The law is silent on how long companies have to maintain the reduced price after a tax rate cut. This open ended provision, in effect, results in price administration, they said. Under GST law, not passing on the benefits of tax rate reduction or availability of input tax credits to consumers by businesses and merchants amounts to profiteering.

The liberty to increase price as per the business cycle will come as a relief to companies, especially large fast-moving consumer goods (FMCG) manufacturers that have faced ‘profiteering’ charges under GST law.

“Whenever there is a reduction in GST rate, businesses have to pass on the benefit to consumers immediately. Thereafter, companies are free to follow their cycle of price adjustments as they deem fit in line with market forces. There is no lock-in period for maintaining reduced prices," said the first official cited above, who spoke on condition of anonymity. If a company has increased prices of products in a particular month in the past, that is a valid explanation for a price increase subsequent to reducing prices in line with a tax rate cut. Businesses, however, should be in a position to defend themselves in case of a complaint, said the person.

Experts said it may not be a very easy task for businesses to defend price increases considering the complexities in the overall business environment and pricing. They said past price trends may show movement both ways and may not be sufficient to justify a price increase in case of a profiteering investigation.

“Businesses may at times want to increase margins on a better selling product to offset losses in other products. There is still an ambiguity on whether that increase in margin for some products would be acceptable by the authorities as a justification for a price increase. Separately, industry has also been looking forward to detailed guidelines on calculating the amount of benefit to be passed on and in specific, the duration for which the reduced price is to be continued," said EY tax partner Abhishek Jain.

The other factor that has got businesses worried is the perpetual nature of the anti-profiteering provision in the CGST Act although the tenure of the NAA is defined. The provision which mandates immediate price reduction of goods and services commensurate with the tax cut, does not specify a sunset clause. A second government official, who also spoke on the condition of anonymity, said that the anti-profiteering provision may be administered by any designated government official or agency in a less elaborate way after NAA’s term ends as the tax system would have stabilised by then. The GST Council extended the term of NAA by two years in June, which enables it to continue to work till end of 2021. The Council had also in June decided to let NAA impose a penalty equivalent to 10% of the profiteered amount on those who pocket the tax benefit meant for consumers.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2024 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting