GST: Registration of firms can be cancelled for not passing on benefits

National Anti-profiteering Authority to be set up for ensuring that customers get the benefit of GST

Companies not passing on benefits of reduced prices on account of the proposed goods and services tax (GST) to customers may lose their registration.

An anti-profiteering authority that will be set up will have the powers to debar an errant assessee from conducting business if he does not pass on lower prices on account of the GST to customers. 

Finance Minister Arun Jaitley has said the anti-profiteering provisions are not to be used unless the government is forced to do so.

The GST is set to be rolled out on July 1. The authority will cease to exist two years after its constitution.

The authority can order a reduction in prices and ask companies to return money to customers. In case customers do not claim their money or are not identifiable, the money will go into a customer welfare fund. The authority can also impose a penalty.

M S Mani of Deloitte said the provision of de-registering a company was “draconian” and added it should be used only against repeat offenders. De-registering an assessee is the last of four actions the authority can take. It has to first tell an assessee to reduce prices, followed by returning money to customers and then imposing a penalty.

At a press conference, Jaitley said, “We hope we do not have to use it (the anti-profiteering clause).”

The authority will have a chairman of the rank of a secretary and four nominated members who have been commissioners of central or state taxes. The GST Council will have the power to constitute a Standing Committee on Anti-profiteering, which will consist of officers of state governments and the central government.

It will also constitute state-level screening committees, which will have one officer of the state government, to be nominated by the commissioner, and one officer of the central government, to be nominated by the chief commissioner. The additional director general of safeguards will be the secretary to the authority.

It will be up to the authority to determine whether the reduction in the rate of tax on goods or services or the benefit of input tax credit has been passed on by companies and dealers to customers.

The standing committee will, within two months from the receipt of a written application from a complainant, establish whether there is evidence to support the claim. All applications will first be examined by state level screening committees, which will forward them with their recommendations to the standing committee.

Heat on profiteers 

Based on the recommendations of the Directorate General of Safeguards, if Authority is satisfied that profiteering has been done by a company, it may order:

• Reduction in prices
• Returning money to the customer along with interest
• Depositing money in Customer Welfare Fund in case the customer does not claim it or is not identifiable
• Imposition of penalty equivalent to the amount of profiteering
• Cancellation of registration