Complications in GST anti-profiteering rules

The official form for making complaints under the anti-profiteering mechanism in the goods and services tax (GST) regime defeats the purpose — to help consumers get the full benefit of tax cuts and input tax credits.


The form, APAF-1, requires a consumer to file in detail the cost structure of the company  against which a complaint is made for profiteering. Also, details on sale price, taxes, both pre-GST and post-GST, benefits of input tax credits, etc.


Rajeev Dimri, partner with consultancy Deloitte India, asked how consumers could be expected to know all these details, particularly of cost structures, when even many insiders in such a company wouldn't be aware of these. Abhishek Jain, tax partner with EY India, said it also appeared that a separate application might be needed for each good or service in reference to which anti-profiteering is alleged.


Pratik Jain of consultancy PwC India agreed the level of information asked for in the anti-profiteering form seemed too detailed for a common citizen. "It might be more realistic for consumers to reach out to the GST commissioners, who could make enquiries and get the relevant information and then file a profiteering complaint on behalf of consumers. The government might want to consider a simpler form for consumers," he added.


Another expert said the government probably wanted to avoid frivolous complaints and hence such a tedious mechanism.


The government is also yet to issue guidelines on what constitutes profiteering.


It recently set up a National Anti-Profiteering Authority, amid reports that some companies, particularly restaurants, were not passing on the benefit of GST rate cuts to consumers. B N Sharma, additional secretary in the department of revenue, is  chairman of the Authority.


In its latest meeting in November, the GST Council had cut rates on a little over 200 items. As many as 176 items saw a cut from 28 per cent to 18 per cent. This leaves only 50 items which attract the highest GST rate of 28 per cent.


Also, the tax rate on restaurants, barring those in star-hotels, was cut to five per cent from 18 per cent, although their input tax credit was removed.


In addition to the Authority, the institutional mechanism for effective implementation of the anti-profiteering measures enshrined in the GST rules consists of a standing committee, state-level screening committees and the Directorate General of Safeguards in the Central Board of Excise & Customs (CBEC).


Consumers who say there has been no commensurate reduction in prices may apply for relief to the screening committee in the state concerned. After forming a prima facie view on the substance of the application, the matter would be referred to the standing committee at the Centre. The latter will, in turn, ask the Director General of Safeguards for a detailed investigation, the findings to go to the Authority.


The screening committee is expected to look into complaints of local nature; the standing committee would ordinarily enquire into cases of mass impact, with all-India ramifications. Most complaints so far on profiteering with screening committees and the standing committee relate to restaurants and the real estate sector. Once the Authority confirms there is a justification to apply anti-profiteering measures, it has the power to order the business concerned to reduce its prices or return the undue benefit availed of, with interest at a rate of 18 per cent, to the consumers of the goods or services. If the undue benefit cannot be passed on to consumers, it can be ordered to be deposited in the Consumer Welfare Fund.


The Authority also has the power to impose a penalty on the defaulting business or even cancellation of its GST registration.

Stumbling block
  • The form, APAF-1, requires consumers to file in detail the cost structure of firms against which a complaint is made for profiteering
  • Details on sale price, taxes, both pre-GST and post-GST, benefits of input tax credits, among others, also have to be produced
  • Govt is yet to issue guidelines on what constitutes profiteering
  • Most complaints on profiteering relate to restaurants, real estate sector

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