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FCS Deepak Pratap Singh




Goods and Services Tax Act, 2017 has been implemented in India from 1st July, 2017. The GST is the biggest tax reform witnessed by the Independent India. The GST hassought to consolidate a vide varieties of Central and State Taxes.
Goods and Services Tax Act, 2017 is the biggest achievement for current NDA government. It binds all Indian States into “One Nation One Tax”, theory. The GST united India again and through GST, we have removed various hurdles in previous tax regime. We have faced multiple of taxes levied by each state on movement of Goods and provisions of services from one state to another state. There were cascading effects of various taxes and the end users were bound to bear the heat.
“Profiteer”means making large some of profit through supply of goods and services or both.
After implementation of GST the value of Goods and Services become cheaper than previous tax era. The policy of our government is based on the welfare of general public and it demands that if prices of goods and services become cheaper than previously charged, the same benefit should be transferred to the end users. The government shall not allow any person to charge the same rate after GST as they were charging before GST regime.
The traders dealing in supply of goods and services shall be forced to pass the benefit of reduction in tax to the end users.
If your business has a lower tax rate than in the pre -GST system, or if you get a tax reduction due to input tax credit, you must pass on those benefits to your customers.
Since introduction of GST will fetch tax savings by way of seamless flow of credits, reduction in rates of taxes, reduction in prices of inputs, reduction in numbers of levies etc., and all of these effects reducing the taxes will go in vain if the government is not able to pass on these benefits to end customers.
Many countries and India have witnessed hike in rate of inflation due to implementation of Goods and Services Tax Act, 2017 due to profiteering by the existing traders and not passing on benefits of reduction of taxes to the end users.
The Australian, Malaysian and Singapore government has implemented various Anti-Profiteering provisions in their GST Module to curb this practice.
Section 171: relates to Anti-Profiteering measures;
Section 171(1):Any reduction in rate of tax on any supply of goods and services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in the prices.
Section 171(2):The Central Government may, on recommendation of the Council, by notification , constitute an Authority or empower an existing Authority constituted under any law for the time being in force , to examine whether input tax credits availed by any registered persons or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods and services or both supplied by them.
Section 171(3): The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed.
NOTE: in case of inclusive contracts, in which payment is inclusive of taxes. In this case when there is reduction in rate of taxes or there shall be profit, while utilising input tax credits. Then the value of supply of goods or services should be reduced accordingly.
Now lets us consider a case in which out put tax rate has been reduced but input tax rates applicable on inputs has been increased, in this case there will be set off of Output and Input taxes.
The ultimate objective of a welfare government is to pass benefits to the end users, i.e. to the recipient of goods and services.
Let’s us consider definition of “recipient”-Section 2(93) of Central Goods and Services Tax Act, 2017 defines as “recipient” of supply of goods or services or both, means-
  • Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; but in some cases, the person, who has paid the consideration and recipient of supply are not the same. In case of slum rehabilitation scheme, the person paying consideration is the government and recipient of benefits are the slum dwellers. They should pass benefits of utilised input tax credits to the government not the end users.
Let’s us consider “Commensurate reduction in price”-The benefits has to be passed on by way of commensurate reduction in price. This means that the prices will be reduced in proportion of benefits received.
There are two approaches in this regard;
  1. Product Specific Approach- in this case the benefits accrued shall be considered related to each products or services offered by the registered person to the end users.
  2. Entity Specific Approach- the benefit shall be calculated for the enterprise as a whole.
The CBDT has clarified in this case that “Reduction in overall tax incident will have to passed on. The authority will examine input tax credit flowing into a product and reduction into total tax incident when it gets a complaint.”
  1. Reduction in prices of inputs because of reduction in tax rates;
  2. Reduction in selling price of output because of reduction in tax rates;
  3. Reduction in number of levies on input and output.
As per power delegated in above provisions, the Government has constituted Standing and Screening Committee on State level and National Anti-Profiteering Committee on National level, to keep check on business.
Form APAF-1 is prescribed for filing complaint under provisions of Section 171 by the customers.
The office of Chief Commissioner of Central Tax and Customs, Vishakhapatnam, has issued a press note dated 6th December, 2017, explaining the methodology through which a builder should calculate benefits as follows;
Pre-GST (Amount in Rs.)
Pre-GST (Amount in Rs.)
Flat Price 30,00,000
Flat Price 30,00,000
Service Tax @4.5% 1,35,000
Service Tax @ 12% 3,60,000
VAT@1.25% 37,500
Approximate ITC on inputs 2,86,299
Total Cost of Flat 31,72,500
Total Cost of Flat 30,73,701
Reduction in Flat Cost 98,799/-
The government is expected to come out with some concrete formula or method to calculate the benefits to be pass on to the end users. Since there shall be disputes, while calculating and assessing the benefits by the assessee and the government authorities.

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