GST - Agenda for the second year - Part - I - Advance rulings, anti-profiteering, cross-charge

Dear Gokul,
The provisions of anti-profiteering incorporated in section 171 of CGST Act is a new concept to Indirect tax regime. In the legacy tax regime, we never had anything of that sort which parallels this provision. Unfortunately, the tax administration, it appears hasn’t given much thought to the consequences of incorporating this provision in the statute except aping the global tax regimes like Australia and Malaysia (where they rolled back to Sales Tax regime). This provision in fact, goes against the fundamentals of a laissez faire economy. Whether there is reduction in tax rate or availability of input tax credit owing to imposition of IGST in place of CST, the price of goods or services are determined by the market forces. What if businesses are unable to reduce their prices due to impact of additional input tax costs owing to setting up of new offices/businesses where section 17(5)(c) and (d) of CGST Act restrains the business from availing ITC on construction/works contract services used for immovable property? Further, section 15 of the CGST Act provides for levy of GST on transaction value. Transaction value is the price actually paid or payable for supply of goods or services. The buyer and seller enter into a contract for purchase of goods or services at a price convenient to both and if there is more supply than demand, the seller will be under compulsion to cut prices to stay relevant in the business. So in my view section 171 is vires of section 15 of CGST Act. Will the Government compensate the losses when prices go below than what it intends to be owing to reduction in tax rates or availability of input tax credits? So, this whole idea of anti-profiteering is gobbledygook and has no place in a 21st century tax regime. It is good for tax consultants who can push their clients to do this analysis and make a fast buck. But
Best regards,
Santosh Hatwar

santosh hatwar 05/10/2018