FIRMS FACE PENALTY FOR PROFITEERING
Companies held to be guilty of “profiteering” under the Goods and Services Tax (GST) regime could be asked to forfeit the amount in question, and it could be deposited with a consumer welfare fund to be created for the purpose, say officials. The contours of a monitoring body are expected to be taken up during the 16th GST Council meeting on Sunday. The new tax is to take effect from July 1. DILASHA SETH writes
Companies found to be guilty of ‘profiteering’ under the goods and services tax (GST) regime could be asked to forfeit the amount in question, which could be deposited with a consumer welfare fund to be created for the purpose, say officials.
The contours of a monitoring body are expected to be taken up during the 16th GST Council meeting on Sunday. The new tax is to take effect from July 1.
“The law provides that a supplier pass on to consumers the benefit of lower prices on account of reduction in tax incidence,” explained an official.
Any profiteering will be decided on a product basis, not earnings at an entity level. So, if a company is into four product lines and having losses but profiteering on one of its products, it will be held liable.
Currently, there is no provision under indirect tax laws to penalise those not passing on tax-related benefits to consumers. The GST legislation says doing so is mandatory.
The anti-profiteering panel will be set up by the GST Council, comprising officials from both the Centre and states. “The body will lose its meaning after a year but a definitive time frame might not be provided,” said the official.
The Centre already has a consumer welfare fund, operated by the department of consumer affairs. Set up in 1992, it is credited with money that is not refundable to manufacturers. As of 2014, around ~17 crore was available. It essentially is to provide financial help to promote welfare of the consumer, create consumer awareness and strengthen the consumer movement.
Under GST, a common fund for all states or common for Centre and states is envisaged, for anti-profiteering. “The profiteered amount cannot be given to consumers directly. So, it will be best to deposit it with the consumer welfare fund,” said the official.