We are in the last leg or the final round of GST and the four goods and services tax (GST) supplementary bills finally got the green signal on Wednesday. Under the current regime, input tax credit is available only on inputs but in present GST the concept of input credit tax is broadened
In the present taxation regime the input VAT paid on purchase of goods is available as credit only on making a taxable sale whereas any tax paid on business overheads is not allowed as credit.
But with the GST which is a destination based tax and one which abolishes the cascading effects in the present tax structure there is also an increased credit opportunities to be availed thereby providing improved profit levels at every stage of supply chain.
To put a check on such improved profit levels we need to pass on the benefit of input credit or tax reduction to the end consumer by way of a commensurate reduction in prices also called Anti- profiteering clause.
The anti-profiteering clause is one of the major aspect which was discussed in the seven hour long debate on Wednesday 18th of may by the Finance Minister Arun Jaitely. With this move the government has also assured protection for the consumers from inflation after GST implementation.
The implementation of GST has often led to some inflationary pressures in countries where this tax is already in place so to put a check on such inflationary pressure Anti profiteering clause would definitely be helpful.
The government will calculate the anti profiteering fact by asking companies for pre- and post-GST cost sheet of each product and calculate the pre-GST tax rate and post-GST tax rate for each and every item. This will help them to understand the exact level of tax benefit which a supplier should get.
Though there is still or no clarity on the fact how will they calculate the profit of an organization made and how minutely will they be monitoring businesses to understand whether benefits have been passed on to consumers in India.
But while the objective may sound simple, implementing an anti-profiteering clause is fraught with grave risks.
With all the tax structure in place and items given their respective slab which they fall in, the biggest challenge is that of Anti Profiteering compliance and Which authority will track all these aspects and conclude whether the prices should be passed on or not.