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

Comments

Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

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…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …