Anti-Profiteering

Section 171 of the Central Goods and Services Tax (CGST) defines the concept of profit avoidance and simply states that the benefits of a tax rate reduction or temporary tax credit should be passed from the supplier to the recipient through the corresponding price reduction. This deliberate act of not lowering the price of a product after a tax cut is called profiteering. The purpose of this concept is to reduce the excess profits that suppliers generate from tax cuts after the introduction of GST. For example, if the price of the item is 100 rupees and the pre-GST tax rate is 15%,  the MRP of the item will be rupees 115. After the implementation of GST, the tax rate will be reduced to 5%, so the MRP for the same product will be Rs. 105. However,  suppliers have begun to raise the base price to keep the MRP  the same. In this way, they increase their profits and consumers pay the same amount after the tax cut. Anti-profiteering measures are aimed at resolving this issue. In this concept, the benefits of tax cuts need to be returned to consumers through price cuts. 

Article 171 of the law has three subsections. Section 171 (1) defines the concept of anti-profiteering, and Subsection 2 requires the establishment of a national anti-profiteering authority to ensure that the provisions of Subsection 1 are complied with by the provider. Subsection 3 provides for compliance with the authority and obligations of the authorities set out in Rule 122-137 of  CGST Rule 2017. Subsection 3A was added in 2019. It states that anyone who makes a profit under Subsection 1 is obliged to pay a penalty of 10 percent of that amount. The warning stipulates that such a penalty will be imposed if the amount is deposited within 30 days from the date the order was placed by the authorities. 

National Anti-Profiteering Authority

The methodology and authority for this authority are set out in Rule 126 of the 2017 Central Goods and Services Tax Rule. It consists of a total of five members, one of whom is the chairman. The chairman is the person who held the equivalent of the Secretary to the Government of India. The other four members are state tax or central tax ministers or technical members who have held or held other similar positions under existing law. The expiration period system is valid for two years from the date of appointment as chairman. Authorities are tasked with determining whether the tax cut has been passed on to the recipient through the corresponding tax cut on the price of the goods. Authorities can also sanction and revoke registrations if they violate established rules or regulations. 

In addition to the National Anti-Profiteering Authority, three other agencies monitor compliance with anti-fraud rules at the state level. First, there is a state-level audit committee consisting of state and central government officials, and then there is a standing committee consisting of state and central government officials appointed by the GST Council. Finally, there is the Directorate General of Antiprofiteering, which acts as a research institute for the National Antiprofiteering Authority.  When a consumer makes a complaint, the file is analyzed by a state-level review board, and if there is key evidence of usage rights, the complaint is referred to the Standing Committee. In addition, if the Standing Committee finds prima facie evidence, the request will be forwarded to the Directorate-General for Anti-profiteering for further investigation. After the investigation, the DGA will refer the investigation to the National Antiprofiteering Authority, which will order a penalty or price reduction to ensure that the benefits of the tax cut reach consumers.