Skip to main content

India may adopt item-based anti-profiteering rules to benefit users

India may adopt item-based anti-profiteering rules to benefit users
India is likely to adopt a product-specific approach to impose anti-profiteering provisions to ensure that consumers get the full benefit of price cuts due to the goods and services tax (GST), including recent revisions.

This means that a company will not be able to reduce prices of slow-moving products in its portfolio while keeping those of fast-moving ones high. "Reduction in overall tax incidence will have to be passed on," said a Central Board of Excise and Customs (CBEC) official. "The authority will examine input tax credit flowing into a product and reduction in total tax incidence when it gets a complaint."
The GST Council had, at its last meeting, cut the tax rate on 178 household goods such as detergents, shampoo, shaving cream and cosmetics to 18 per cent from 28 per cent . The government has asked industry to pass on GST reductions to consumers.
The CBEC chairman has also written to companies and restaurants individually asking them to cut prices. The government is keen to ensure that benefits are passed on for all the items and there is no averaging at an organisational level.Provisions in the anti-profiteering framework prescribe that cuts in tax incidence have to be passed on commensurately to consumers.
For instance, the tax has been reduced for most ceramic items, which makes it possible for companies to keep prices high on bigselling units such as sinks and tiles and cut them on others to show an average reduction of 10 percentage points to 18 per cent from 28 per cent .The Indian anti-profiteering model is closer to the Australian one, which also follows a product-wise approach.
Tax experts, however, said some flexibility needed to be built into the framework. "Fixing anti-profiteering guidelines on the basis of products is simpler and will help in mapping the entire supply chain," said EY partner Bipin Sapra."However, each company has its unique cost and margin structure, given its business, and the same cannot be ignored while deciding whether the price of a particular product sold by a particular entity will decrease or not and if so by how much."

Within a product segment, companies should be allowed to have differential pricing so long as the total quantum of profit has been passed on, said PwC indirect tax leader Pratik Jain. "For example, if a company has many brands of shampoo, then they can possibly decide for which ones they want to pass more benefit and where less," he said.

The anti-profiteering authority is likely to be constituted in the next 10 days. The union cabinet has already approved its structure.

India has adopted a three-tier structure for the investigation of anti-profiteering complaints from consumers.State-level screening committees and a standing committee at the national level will field complaints. They will refer them to the director general of safeguards for investigation. The investigation report will then be taken up by the National Anti-Profiteering Authority for a final decision.

Anti-profiteering provisions are meant to act as a deterrence, the official insisted, and the government is keen that they aren't required to be invoked too often.
The Economioc Times, New Delhi, 27th November 2017


Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

New money laundering norms stump jewellery sector

New money laundering norms stump jewellery sector Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect. Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act. Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment. The notification, issued on Augus…

Confusion over branded food GST

Confusion over branded food GST The GST Council's statement over the weekend on applying tax on branded food items has left most of the trade confused.

Even though the Council has not changed the rates on food -0 per cent on unbranded stuff and 5 per cent on brands -many small traders who didn't levy GST earlier said they could come under the 5 per cent slab after the clarification.

While they predicted some increase in consumer prices, large players said they can absorb GST in many ways and keep prices steady.

"Trade is confused and hence on behalf of our chamber, we have asked our members to go ahead and charge 5 per cent GST," said Sushil Sureka, general secretary of the Ahilya Chamber of Commerce and Industry in Indore.

The statement clarifying the application of GST came after some businesses were found deregistering their brands and selling under corporate brand name without paying tax, after the Council exempted unbranded food from the new all-encompassing indirec…