Anti-Profiteering in GST and Audit Control

I begin this article with my own quote “Profit is good but not profiteering”. The Indian Constitution does not restrict any businessman to earn profit in their business but subject to public interest. Earning profit is a main fundamental scenario for every business activities but making excess profit legally or illegally is restricted. So the government has designed the Anti-Profiteering Provision as per Section 171 of CGST Act 2017 in order to protect the Consumer by restricting the company to get the benefits. Let us thoroughly discuss the Anti-Profiteering provision here

Statutory Provision under GST Law: As Per Section 171 of CGST ACT 2017, Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. ‘’The Main objective of this provision is to pass on the benefits to the ultimate consumer due to reduction in rate of output tax and reduction in rate of Input tax’’.

The Benefit of ITC:

Mr. DAA, a Work Contractor provided a Construction of Building service to Mr. Y on 01-06-2017 and Mr. Z on 01-07-2017 respectively. The work contractor could not avail the Cenvat Credit on Purchase of Cements and Bricks for Mr.Y’s Service because as per Rule 2(k) CCR-2004, it can’t be considered as Input so the cost of the work contract would have got increased because of the non availment of Inputs but the same work contractor can get the ITC on purchase of Cements and Bricks as per Section 17 of CGST Act 2017 so the cost of Work Contract should be reduced according to the reduction in Input tax.

Reduction in Output Tax:

MC Pvt.ltd in Chennai (MCC), a manufacturing company has sold the goods to CA Pvt.ltd in Coimbatore (CAC) on 01-06-2017 and 01-07-2017 respectively. On 01-06-2017, MCC would have charged around 31% taxes which include (ED-12.5% VAT-14.5% and Octroi+LBT+Other taxes 4%) but on 01-07-2017 the MCC has charged taxes at 28% only. The reduction in Output tax of 3% will have to set off against the cost of production then the final price should be reduced.