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Anti Profiteering Application - An analysis

FEBRUARY 20, 2018

By Rishab J

THE common experience of the countries introducing GST is that they face a short-term inflation due to the business entities utilizing the opportunity to ensure increased profitability during the transition period. Therefore, one of the major steps undertaken by the governments is to regulate the profit, i.e. ensure that the companies do not undertake profiteering measures and take undue advantages of the higher credit availability or reduced tax rate.

Taking a leaf out of the experience from Australia and more recently Malaysia, India too has introduced provisions relating to Anti-Profiteering in the GST Law. The anti-profiteering authority set up by the government to ensure that the benefit is passed has already received 169 complaints (as reported recently by the pink papers) and is scrutinising the record of other firms.

Relevant Provisions

Section 171 of the CGST Act, 2017 provides that any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices.

In line with the aforementioned provisions, the Government has taken a step forward and introduced the Anti-Profiteering Application Form (APAF - 1), wherein a complaint can be registered against a business entity breaching the aforementioned provision.

In this article,an attempt is made to analyse Form APAF-1 in respect of all the fields in the applicationto bring to light the implicationswhich affect all the stakeholders involved. This application is required to be submitted manually to the Standing committee and screening committee for scrutiny with all the relevant documents.

Who can file?

1. Interested Party (Interested Party includes suppliers or recipients of goods or services)

2. Jurisdictional Commissioner

3. Any other person

Whether Single Application can be filed for multiple goods and services?

No. An applicant is required to file an individual application for each product/service. In case the applicant wants to report against multiple products, he shall be required to file multiple applications.

It is pertinent to note that the term used is single good or service, so the government is expected to issue clarification in case of mixed or composite supply, wherein there are 2 or more goods/service involved in a single supply.

We shall now proceed and analyse the contents of the application-

Serial No. in the Form	Field	Mandatory/ Non-mandatory	Inference/Comment & Suggestion
A1.	Name of the applicant	Mandatory Field	Even a person operating in the same line of business can initiate the complaint
A2	Category of the applicant	Mandatory Field	Interested Party/Commissioner/Any other person- Specific codes for each category is provided for mentioning the same in the application. With an option available to “any other person” to file an application, the government has tried to ensure that the business entities do not form a supply chain cartel, wherein none of the person in the chain reduces the price but there is action initiated against the such business entities even on a complaint received from unrelated party.
A3	GST Registration number. i.e. GSTIN	Non Mandatory Field	With an option available to entities forming a part of the supply chain or persons involved in similar line of business. A specific column for mentioning their GSTIN is provided in the application.
A4 and A5	Address and Contact number	Mandatory field	These are the basic details of the applicant required to be submitted.
A6	E-mail ID	Non Mandatory field	The applicant has an option to submit his email address.
A7	ID proof of the applicant (Code)	Mandatory field	The applicant is required to provide the code of the ID proof. The codes prescribed are as follows 01. Aadhaar Card issued by the Unique Identification Authority of India 02. Voter ID 03. Permanent Account Number (PAN) card 04. Driving Licence 05. Passport 06. Ration card having photograph of the applicant 07. Any other proof of Identity (Specify)
B1	Name of the supplier	Mandatory field	The name of the supplier is required to be mentioned in the application.
B2	Category of the supplier (Code)	Mandatory field	The applicant is required to mention the code of the category of the supplier, the codes are as follows 01 Manufacturer 02 Service Provider 03 Trader 04 Others (Specify) Therefore, with an option to file against any other person, not falling in the category of Manufacturer, Service provider, trader intends to expand the scope of the application.
B3 and B4	Address and GSTIN of the supplier	Mandatory field	The application of the anti-profiteering only intended to be filed against a person making GST supplies, the GSTIN and the address of the supplier is made mandatory.
B5, B6 and B7	Contact Number, E-mail ID and Website	Non-Mandatory field	This information shall be entered in the application, if they are available with the applicant.
C1	Description of the good/service	Mandatory field	The description of the goods or services as provided in the invoice or price list is required to be recorded.
C2	HSN/SAC	Non-Mandatory field	Though this being a non-mandatory field, the applicant can mention the same as it is recorded in the invoice.
C3 and C4	Actual Price charged per unit Pre-GST and Post GST	Mandatory field	The applicant shall record the price/unit charged before introduction of GST and post introduction after deducting any discount or rebate given by the supplier.
C5, C5a and C5b	If goods are covered under MRP provisions, if yes then MRP pre GST and post GST	Non-Mandatory field	For FMCG products and other like products bearing MRP, the applicant can specify that the products are covered under MRP provisions and also specify the pre and post GST MRP, if he possess knowledge about the same.
C6, C6a and C6b	Comparative per unit actual Price/Value of like goods/services charged by other supplier pre GST and post GST (Name and GSTIN of the other supplier)	Non-Mandatory field	For few supplies, the measure of profiteering practice can be determined by the change in price of similar good/service provided by other suppliers. Therefore, any such information available with the applicant can also be provided in the application.
D2a to D2f	Excise Duty, Service Tax, VAT, Luxury Tax and Others including cesses, as applicable charged on the good/service.	Non-Mandatory field	This information enables the computation the Total tax rate (effective rate) pre GST and Post GST. But, the applicant may not possess the knowledge of the taxes not specifically mentioned in invoice or product, such as Excise Duty, Cess etc., therefore it is made non-mandatory field.
D3	Total tax per unit (pre GST)	Mandatory field	This is a sum of Excise Duty, Service Tax, VAT, Luxury Tax and Others including cesses, as applicable is required to be included in this field. Though this field is made mandatory, the applicant may not possess the knowledge of the taxes not specifically mentioned in invoice or product, such as Excise Duty, Cess etc.
D4a to D4e	CGST, SGST/UTGST, IGST, Compensation cess, Other cess	Non Mandatory field	Post GST, the tax levied can be easily identified as it is a sum of CGST+SGST/UTGST or IGST with Cess, including compensation cess, if applicable. However, the same is made non-mandatory field.
D5	Total tax per unit (post GST)	Mandatory field	This is a sum CGST, SGST/UTGST, IGST, Compensation cess, Other cess, as applicable. This information shall be available in the invoice of the supplier
D6	Post GST reduction in rate of tax/unit	Mandatory field	Difference between D3 and D5 is reduction in rate of tax rate/unit.
D7	Benefit of Input Tax Credit – Input Taxes/Duties Pre-GST per unit, credit of which was not available (out of the Taxes/Duties subsumed in GST) and Transitional Input Tax Credit, if any.	Non-Mandatory field	GST proposes to introduce seamless credit flow throughout the supply chain. Therefore, any benefit of excess eligibility of Input tax credit because of introduction of GST is required to be passed. Since the benefit of the excessive ITC cannot be computed easily, the same is introduced as a non-mandatory field in the application.
D8	Difference between actual price charged per unit- Pre GST and Post GST.	Non-Mandatory field	This is a difference between Sl No. C4 and C3 of the application.
D9	Amount of benefit not passed and GST on the after adjusting difference between pre GST and post GST actual price/value	Non-Mandatory field	It is sum of Sl No. D6, D7 and D8 of the application.
D10	GST on the amount of benefit not passed.	Non-Mandatory field	It is equal to D9 multiplied by the rate of GST (Including cess, if any)
D11	Post GST price per unit/ value to be reduced by.	Non-Mandatory field	It is sum of Sl No. D9 and D10 of the application.
D11	Additional information.	Non-Mandatory field	The applicant can further submit any other information which may be available with him and which may enable to establish the profiteering practice of the supplier

A bare reading of the aforementioned mandatory and non-mandatory fields clearly indicate the intention of the government to extract the maximum information available with the complainant, but on hindsight, by making majority of the fields as non-mandatory, the Government has clearly indicated its intention to ensure that every person who possesses any suspicion of profiteering measure undertaken by the business entities shall furnish the same to the department for further scrutiny.

If the firms are found guilty of not reducing the prices of the goods/services, they shall be liable to punishment as prescribed under the Central Goods and Service Tax Rules.

Penalty for undertaking Profiteering measures

Rule 133(3) of the CGST Rules, 2017 provides that any person found guilty of undertaking profiteering measures and not satisfying the test laid under Section 171 of the CGST Act shall be subjected to the following punishments-

1. Reduction in prices.

2. Return of the amount charged in violation of the anti-profiteering measure to the recipient of such goods and services with interest, if applicable.

3. Imposition of penalty,

4. Cancellation of registration.

Way forward for the Industry

Therefore, it is expected that every business entity undertakes the cost-profit analysis of each product under the erstwhile regime and under GST regime and ensures that any benefit availed by it is passed on to the end consumer. Further, it is required to be noted that the application of the concept of Anti-profiteering should be applied with every change of rate of tax in the GST regime.

(The author is Associate, Lakshmikumaran & Sridharan, Attorneys, Bangalore and the views expressed are strictly personal.)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

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