When the government is targeting on an anti-inflationary GST system, it is necessary to ensure that tax reduction on several commodities should brought down prices as well. Here, tax administers fear that when cost cascading effect and input tax credits are allowed, tax burden will come down. As a result, businesses may not bring down prices rather they may convert the tax reduction into profits. The situation is called profiteering. Checking this profiteering through anti-profiteering mechanisms is the task in front of the government.
The GST Council proposed formation of an anti-profiteering body using the tax administrators to make sure that businesses are transferring tax reduction to price reductions.
But the question is about the working of such a body. Business and industry feel that such a bureaucratic exercise will only add to corruption by promoting inspector raj.
“The tax department is considering bringing in rules for anti-profiteering. Even though it may take some time to put the machinery in place for anti-profiteering after GST rollout, the rules will be finalized by the implementation date,” the PTI quoted a government official after the fourteenth GST Council meeting at Srinagar.
The Council is meeting on June 11th to consider several other issues related with the rollout of the new tax regime on July 1st. Here, along with several other matters, the Council is expected to consider the formation of the Anti-profiteering body.
The anti-profiteering scrutiny is a transitionary arrangement as the process will be done during the implementation phase of GST. Revenue Department is aiming to finalize the anti-profiteering clauses by July 1st itself.