Introduction
It was seen in multiple countries that after introduction of GST there was increase in price of commodities despite the availability of tax credits from production stage to final consumption which instead should have resulted in reduction of prices. The reason behind this was that the suppliers were not passing on the benefit of reduction in tax rates to consumers[1]. Similar situation was encountered during the introduction VAT in India. In a report published by the Controller & Auditor General of India it was found that in India after the introduction of VAT, the manufacturers did not reduce the MRP of goods despite the fall in tax rate thereby earning wrongful gains. To avoid/prohibit this practice the framers of GST law inserted the provision of Anti-Profiteering[2].
What is Anti-Profiteering?
The term Anti-Profiteering connotes that no registered person should make additional profits while transitioning to GST. The section 171 of the CGST Act, clearly states that any reduction in the rate of tax on any supply of goods or services or benefit of ITC shall be passed on the recipient by way of commensurate reduction in prices. On perusal of the section, it is clear it delas with two situation one relating to passing of benefit of reduction in the rate of tax and second pertaining to the passing on the benefit of ITC. There have been multiple instances where the benefit of tax reduction or benefit of ITC claimed are not transferred to the consumer. In Sh. Madhumai Panjumal Keswani v. M/s Panchshil Infrastructure Holding Pvt. Ltd.[3] the complaint was filed by the Applicant stating that the Respondent/Promoter had not passed on the benefit of ITC to him by way of commensurate reduction in the price on purchase of an apartment unit. And after the DGAP’s Report that clearly showed that the ITC as percentage of the turnover that was available to respondent during pre-GST period was 1.88% and post GST was 3.78% this confirmed that Respondent had benefited from ITC and has profiteered by Rs. 1,96,69,482/- Hence, The Respondent was directed to refund the said amount with interest of 18% by the authority. Also, in Mahendra Kishanlal Prajapati and Ors. v. M.s Vishwanath Builders[4] in this case when DGAP’s Report that clearly showed that the ITC as percentage of the turnover that was available to respondent during pre-GST period was 4.67% and post GST was 8.42% this confirmed that Respondent had benefited from ITC and has profiteered by Rs. 2,95,93,850/- it was found that Respondent /Promoter did not pass on the benefit of ITC to him be way of commensurate reduction in price after implementation of GST. The Authority herein ordered the Respondent to refund the profiteered amount to the recipients of supply.
Who is the Adjudicating Authority in case of Anti-Profiteering?
The CGST Act, 2017 mandates three-tire systems for in investigation and adjudication of complaints regarding anti-profiteering.
- National Anti-Profiteering Authority (NAA)
The NAA is a Five-member committee consisting of Chairman and four technical members who are or were Commissioners of state tax or central tax. The authority determines that whether a registered person has passed on the benefit of reduction in tax or ITC benefit to consumer or not.[5]
2. Directorate General of Anti-Profiteering (DGAP)
The Directorate General of Anti-profiteering (DGAP) has been created vide office order No. O5/Ad.IV/2018 issued by the Central Board of Indirect Taxes & Customs, Department of Revenue, Ministry of Finance, Government of India on 12.06.2018 by renaming the ‘Director General of Safeguards’ as ‘Directorate General of Anti-profiteering’. This Directorate was assigned new functions and includes the following:
- Conduct of investigation to collect evidence necessary to determine whether the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices, in terms of Section 171 of the Central Goods and Services Tax (CGST) Act, 2017 and the rules made there under.
- Responsibility for coordinating anti-profiteering work with the National Anti-profiteering Authority, the Standing Committee and the Screening Committees[6]
- State -Level Screening Committee and Standing Committee
3. State Level Screening Committee and Standing Committee
The state level screening committee and standing committee are created as per Rule 123 of CGST Rules 2017. The GST council may constitute a standing committee on anti-profiteering which shall consist of such officers nominated by state and central government. Further, a state level screening committee shall consist of on officer of state government to be nominated by the Commissioner and one member of central government to be nominated by chief commissioner.
These three bodies works inconsonance with each other the aggrieved persons may file an application with State-Level Screening Committee or Standing Committee if they are prima facie of the opinion that supplier has violated section 171 of CGST Act, they will forward the complaint to Directorate General of Anti-profiteering (DGAP) who will carry out further investigation on the matter and present the final report of the investigation before NAA for adjudication.
How to file the Complaint?
There are multiple ways to file a complaint against a supplier for anti-profiteering-
- Online Complaint
Complainants can register their complaints on web portal of NAA via http://www.naa.gov.in/complaint.php
Complainants can email their complaint with supporting documents to standing committee or state screening committee via sc.antiprofiteering@gov.in
- Post
Complainants can submit their complaint by post on the addresses mentioned below-
- National Anti-Profiteering Authority
National Anti-profiteering Authority
Dept. of Revenue, Ministry of Finance
6th Floor, Tower One
Jeevan Bharati Building
Connaught Place
New Delhi-110 001.
2. Directorate General of Anti-Profiteering
Directorate General of Anti-profiteering,
Dept. of Revenue, Ministry of Finance
2nd floor,
Bhai Veer Singh Sahitya Sadan,
Bhai Veer Singh Marg,
Gole market, New Delhi -110 001.
3. Standing Committee
Directorate General of Anti-profiteering,
Dept. of Revenue, Ministry of Finance
2nd floor,
Bhai Veer singh sahitya sadan,
Bhai Veer singh marg,
Gole market, New Delhi -110 001.
What is the Legal Procedure after Complaint is filed?
As per the provision of CGST Act, 2017 and the rules structured under the act, the complaints involving issues of all India nature are to be filed with Standing Committee directly and complaints involving issues of local nature are to be filed with the State-Screening Committee.
It must be noted that the State-Screening Committee after being satisfied that the supplier has contravened section 171 of the CGST Act, 2017 they would forward the complaint to Standing Committee. According to Rule 128 of CGST Rules, 2017 the Standing Committee shall within a period of 2 months from the date of receipt of written application, will examine the accuracy and adequacy of the evidence provided in the application to determine whether there is prima facie evidence to support the claim of the applicant. When the standing Committee is satisfied that the there is prima facie evidence that the supplier has not passed on the benefit to consumer, they refer the matter to [DGAP] Director General of Anti-Profiteering for detailed investigation.
Initiation of Investigation
As per Rule 129 (3) of the CGST Rules, 2017, the DGAP shall first issue a notice to the interested parties wherein it must state-
- The description of goods and services in which the proceeding have been initiated.
- Summary of statements of facts on which allegation are based.
- The time limit allowed to the interested parties and other persons who may have information related parties and other persons who may have information related to proceeding for furnishing their reply.
Under the provision of the CGST Rules the DGAP is the proper officer who is invested with the power to conduct investigation and collect evidence which are necessary for determining whether or not the benefit of tax reduction or ITC is transferred to consumer or not In furtherance of the same the DGAP also has the power to summon any person whose presence is necessary either to give evidence or to produce a document as per the provision of CPC. The time limit to complete the investigation under Rule 129 (6) is 6 months which is further extendable to 3 months. And upon completion of the investigation the DGAP will furnish the Authority with the report of the said investigation.
Initiation of Adjudication before Authority
The authority shall within a period of six months from the receipt of the report has to determine whether a registered person has passed on the benefit of the reduction in the rate of tax or benefit of ITC. After the receipt of such report the authority would prove an opportunity of hearing to the interested parties wherein, they could explain why the report submitted by DGPA should be or not be accepted. The supplier can file their written submission in respect of the same. After filing of the written submission, the complainant is also provided an opportunity of filing its reply to the written submission submitted by the supplier. After considering the DGAP’s report, written submission and reply to the written submission will adjudicate on the issue. If the authority is of the opinion that the supplier has not passed the benefit to the consumer, they may direct-
- Reduction in price
- Return to the recipient, an amount equal amount equivalent to the amount not passed on by way of commensurate reduction in price along with 18% interest from the date of collection of higher amounts till the date of refund.
- Cancellation of registration
Compliance to the Order passed by Authority
Any order passed by the authority shall be immediately complied with by the registered person failing to which actions shall be initiated recover the amount as per the recovery provisions provided within the CGST Act, 2017.
[1] National Academy of Customs, Indirect Taxes and Narcotics, “National Anti-Profiteering Authority in GST”, available at: AntiprofiteeringWebVersion.pdf (cbic-gst.gov.in)
[2] Central Board of Indirect Taxes and Customs, “FAQ on Anti-Profiteering, available at: Anti-prof-FAQs-FINAL-FAQs.pdf (cbic.gov.in)
[3] Sh. Madhumai Panjumal Keswani v. M/s Panchshil Infrastructure Holding Pvt. Ltd Case No. 62/2022, available at: 1661922459Panchshil F.Order.pdf (naa.gov.in)
[4] In Mahendra Kishanlal Prajapati and Ors. v. M.s Vishwanath Builders, Order No. 61/2022, available at: 1661773866vishwanath order.pdf (naa.gov.in)
[5] Rule 133(3) of CGST Rules, 2017.
[6] Director General of Anti-Profiteering, “Central Board of Indirect Taxes and Customs”, available at: DG Anti-profiteering (cbic.gov.in)
