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Protection of Consumer Interest by anti-profiteering clause in GST Law

As per Central Government’s point of view, The Price Control and Anti-Profiteering Law is essential to diminish concerns among consumers to ensure that vendors will not unreasonably increase prices of goods and services in anticipation of the introduction of the Goods and Services Tax regime. The anti-profiteering clause in Model GST law will protect interest of consumers.

The consumers will also get relief as the revised model law proposes to bring in a price control mechanism (Section 163) to ensure that input tax credits availed by any registered taxable person or the reduction in the price on account of any reduction in the tax rate under GST, have actually resulted in a commensurate reduction in the price of the said goods and/or services.  For this purpose, the Government proposes to constitute an Authority or entrust an existing Authority to exercise powers and functions and impose penalty where it finds that the price has not been reduced on account of additional input tax credit or reduced tax rate under GST regime.

The concept of anti-profiteering is not new to India. The West Bengal Anti-profiteering Act, 1958 was enacted to prevent profiteering in certain goods.

Now, the question is anti-profiteering clause in GST regime will really be benefited to consumers.

Business houses should review their pricing policy, after considering the provisions of the Anti-profiteering Law and related regulations to ensure that they do not violate any of the provisions under the GST Law.  At present the essential commodities Act and various other legislation in India give protection to the Consumers, but the new compliance under new GST Law will be of more significance.

The dilemma is, there is no liability has been fixed that who will undertake the task,how it will be happen, when it will start and end, Is it necessary to add one more compliance burden on business houses. Malaysia also introduced an anti-profiteering provision, along with the introduction of GST in April 2015,It led to widespread litigation and was found to be administratively difficult to implement.

Overseas experience says that anti-profiteering provisions are only effective if there is a significant lead-in time to allow the relevant authority to educate consumers and businesses as to their respective rights and obligations. It is this education process that has the greatest impact on consumer confidence and business behavior. This included the publication of pricing guidelines, communication strategies for different market segments for consumers and businesses to get advice.

Indian business houses has to make some presentation before finance ministry for considering their challenges in enforcing anti-profiteering clause in GST law, they are:-

1) They must ask detailed guidelines of the mechanism for computation of benefit and administration. For example the trader or supplier has to demonstrate group, division or business vertical wise net profit margin,rather than for individual goods and services.
2) There should be flexibility for demonstrating profitability in percentage terms and not in absolute value.
3) Any increase in net margin for reasons and circumstances beyond the control of business should not be doubted.
4) If any price variation in GST regime on account of additional input tax credit or reduced tax rate alone should trigger penal provisions.
5) If any increase in net margin that arises after adjusting price for additional input tax credit or reduced tax rate should not be viewed adversely.


Business houses believes that exploiting customers is not a viable business strategy.India has a competitive, open and growing market. Both Indian businesses and consumers are well placed to enjoy the benefits of GST, without government price monitoring.

From department’s prospective, once the GST has commenced, businesses and advisers would have moved on, but not so the authorities responsible for administering the provisions. Litigation and damage to unfortunate and unsuspecting businesses will inevitably follow with little or no impact on prices.

ASSICHAM has also recommended to remove anti-profiteering clause from Model GST law.Competitive pressure could lead to costs coming down. If one company reduces prices, others may need to bring down prices. With respect to the B2B business, the clients will be forced to adopt competitive pricing. In the consumer facing business, tax incentives may not immediately passed on to customers. Only when one firm cuts rates does the entire industry follow suit.
Conclusion is that there is no need of additional burden of Compliance on Indian business community.

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