The government on Tuesday released anti-profiteering rules under the Goods and Services Tax (GST) regime that provide for cancellation of registration of any entity or business if it is found guilty of not passing on the benefit of lower tax rates or input tax credit to the consumers.
Cancellation of registration is in addition to the power to levy penalty that was prescribed under the law. According to the relevant rules notified by the government, the National Anti-profiteering Authority (NAA) can recover the excess profits made by the firm with an interest of 18 per cent and impose penalties on it.
At the same time, the Council wants to ensure that in cases where the levy is going up, companies do not take unfair advantage.
According to the new rules, when a complaint is received about any company or a trader making undue profit by not passing on the benefit of lower tax incidence because of GST, it would be referred to a standing committee appointed by the Council.
The committee would decide whether an inquiry should be initiated on a complaint. The new anti-profiteering authority will carry out an investigation only when the committee recommends so.
The inquiry report with recommendations would be referred back to the standing committee, and any penalty or action would be taken by either the committee or the Council.
To carry out the investigation, the new authority will be a full-time body with "unfettered" powers to issue summons, including to the top management of companies that are alleged to have profiteered. But the power to levy penalties may rest with the all-powerful GST Council or the Standing Committee of tax officers.
According to a Times of India report, tax practitioners said that the provision for cancellation of registration is too harsh, given that the rules are too open-ended.
A consultant said in their current form, the provisions can be misused by rivals, who can lodge a complaint against a company, which will have to answer queries.
The NAA has been provisioned to be in existence for two years unless the GST Council extends the tenure and will not be able to take any of these steps suo motu or on its own.
After the 15th meeting of the GST Council on June 3, Finance Minister Arun Jaitley had said a committee comprising officials from the Centre and states would be set up to look into the complaints with regard to the anti-profiteering clause that seeks to prevent companies from making undue gains post GST rollout.
Section 171 of the Central GST Act provides that any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit will be passed on to the recipient by way of commensurate reduction in prices.
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