In the light of reports that a large number of companies and businesses are not passing on the benefit to the consumers and are pocketing the extra tax charge as profit, the Government is planning to increase the quantum of penalty on such Companie.
The “anti-profiteering” measures enshrined in the GST law provide an institutional mechanism to ensure that the full benefits of input tax credits and reduced GST rates on supply of goods or services flow to the consumers. This institutional framework comprises the NAA, a Standing Committee, Screening Committees in every State and the Directorate General of Safeguards in the Central Board of Indirect Taxes & Customs (CBIC).
A weeks ago, the Government had reduced GST on more than 100 items w.e.f 27.07.2018, and has decided to initiate anti-profiteering measures against the traders if such benefit was not passed on to the consumers.
On 21 July, the goods and services tax on washing machines, small televisions and air conditioners, as well as other goods, was reduced from 28% to 18%. However, there were questions that whether manufacturers pass on the full benefit to customers or retain some of it as their profit.
In an effort to curb profiteering, the finance ministry is considering an amendment in the GST law to penalize companies and businesses which have not been passing the rate cuts announced by the GST council to the consumers.
Presently, the penalty for such violations is Rs 10,000 or the amount of tax evaded, whichever is higher.
But, the violators may continue to benefit as government is planning to bring the amendment next year.
The GST council, during the last meeting, discussed the rationale behind bringing the amendment. The amendment proposes the formation of a multi-ministry panel including officials from finance and law.
According to sources, the government has found that companies have not been passing the benefit of the tax cut or the input tax credit to the consumers, thus defeating the very purpose of tax cuts and other provisions.
