Goods and Services Tax is an opportunity to right the wrongs. One of the major benefits of GST is that it provides for Input tax credit. Since, there will be no tax on already paid taxes, GST is beneficial for everyone. The government is taking step to protect the common folks from exploitation. So, the government inserted Clause 171 (Anti-Profiteering) in the GST Law.

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Anti-Profiteering (Clause 171)

What –

Clause 171 or the Anti-profiteering Clause in the GST law makes it mandatory to pass the tax benefit to the consumer. Traders can pass the tax benefit through equal reduction in prices.

Why –

As Shakespeare said, profit is a blessing as long as it isn’t stolen. Anti-profiteering doesn’t mean traders should not earn profits – it is the motivation for doing business. According to the Council, the clause is there to ensure that the consumers get the benefits of GST.

Anti-Profiteering, GST anti profiteering

Related rules made public on June 19th:

If a trader does not pass on the benefit,

either fully or partially,

the Council can cancel his registration.

How –

The State Level screening body will examine the complaint. After which, the Standing Committee will receive and look into a meritorious complaint. The National Level screening body will check the facts. Finally, the National Anti-profiteering Authority (NAPA) will scrutinize satisfactory information. To reduce the duration of inspection, the government will issue Standard Operating Procedures.

Who –

There is a three tiered mechanism to find and take action against offenders. There are two screening bodies at the national and state levels, with five members each. The NAPA has authority to examine each complaint separately and to pass the necessary order. The Authority will exist for 2 years unless the Council recommends otherwise.

national anti profiteering authority, NAPA, anti-profiteering gst

However, if the members of NAPA differ in opinion, the opinion of the majority will prevail.

Penalties –

Although the FM insisted that the Council hoped to never impose the clause, the penalties seem rather extreme. The NAPA can order:

  • Reduction in prices proportionate with lowering of tax incidence,
  • Return the unjustified profit,
  • Charge 18% interest on the sum for the intervening period (from the date of collection of higher amount till the date of return),
  • Imposition of penalty,
  • Cancellation of registration.

The risk of getting their registration cancelled is scary enough to make traders pass on the benefits to the consumers. Now, we have to wait and see the effectiveness of this tactic.

Bakhi jisko darr nai lagta woh karega tax ki chori.

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