NEW DELHI: The ongoing anti-profiteering provisions in the GST law could impede business operations and introduce uncertainties, according to experts. Considering that it has been six years since their inception and the transition to GST has been completed, they recommend discontinuing these provisions.
Anti-profiteering provisions were introduced at the time of GST implementation to ensure these don’t lead to inflation and customers do get the benefit of reduced tax incidence. In countries like Australia, where these provisions were introduced, it was only for a short time. As per Pratik Jain, Partner, Price Waterhouse & Co LLP, after over six years of GST, market forces are expected to naturally determine prices without such strict regulations.
“GST Council should consider providing a timeline by which these provisions would cease to exist. It’s important because rate rationalisation under GST is expected in next 12 to 18 months,” Jain said. In its latest ruling, the Delhi high court upheld the constitutionality of anti-profiteering provisions in the GST law, requiring companies to transfer tax benefits to consumers. However, it emphasised that a uniform formula can’t fit all scenarios, as each case and industry differ. The court criticised the methodology used for real estate companies, highlighting a lack of correlation between the turnover and input tax credit. In view of this, companies continue to lack clarity on the computation method and how profiteering will be assessed.
In some cases, authorities have solely focused on price reductions as the means to pass on benefits, overlooking other potential methods. Additionally, companies are burdened with maintaining detailed records of costs and pricing, adding to their compliance challenges, as per Manish Mishra, Partner, JSA Advocates and Solicitors.
Abhishek A Rastogi, founder of Rastogi Chambers, who is arguing this aspect before the Supreme Court, opines that any mechanism that ultimately results in price control over the period of time will have to pass the test of constitutional validity. “The moot point with respect to the constitutionality before the Supreme Court will remain whether the provisions with respect to Anti Profiteering are constitutional, especially in absence of any methodology to determine the quantum of profiteering,” said Rastogi .
“...without a well-defined methodology or guideline in law to determine what constitutes ‘commensurate reduction in prices’, excessive state intervention can’t be ruled out. A clear outline in law will support enterprises both with ease of compliance and ease of doing business,” said Raghavan Ramabadran, executive partner, Lakshmikumaran and Sridharan.