GST draft makes it must for companies to pass tax benefit to consumers


NEW DELHI: The government has proposed an “anti-profiteering” clause in the revised draft model goods and services law to ensure that businesses pass on any benefit of reduction in tax rates to consumers, a move aimed at checking any spike in prices of commodities as a result of the rollout of the

ambitious tax reform measure

The Centre on Saturday unveiled three drafts which include the model GST law, the IGST law and the compensation law which will be discussed by the GST Council in its two-day meeting starting December 2. The draft integrated GST law said that the Centre will notify the rates on the recommendations of the GST Council but it should not exceed 28%.

The previous draft did not have the “anti-profiteering” clause and tax experts said the gains made by companies due to GST needs to be passed on to consumers. “But for industry it could mean lot of paper work and implementation challenges,” said Pratik Jain, partner and leader, indirect tax, at PwC. To ensure implementation of the anti-profiteering clause the Centre may set up an authority or entrust and existing authority examine if tax reduction benefits have been passed on.


revised draft model goods and services law

unveiled by the government contains an anti-profiteering clause and says that to ensure its implementation, the Centre may set up an authority or entrust an existing authority to “examine whether input tax credits availed by any registered taxable person or the reduction in the price on account of any reduction in the tax rate have actually resulted in a commensurate reduction in the price of the said goods or services supplied by him”.

The authority will have the power to impose penalty, “as may be prescribed in cases where it finds that the price being charged has not been reduced,” according to the draft.

The government is keen to ensure that the three legislations are approved in the ongoing winter session of parliament to meet the deadline of rolling out GST by April 1. “These laws will be considered by GST Council in its meeting scheduled for 2nd and 3rd Dec and finalised,” revenue secretary Hasmukh Adhia said on micro blogging site Twitter.

In the revised draft, the definition of “goods” excludes securities, which means that no GST needs to be paid on sale and purchase of securities. This would allay the concerns of the stock market, brokers, mutual funds and banks as the definition of “goods” in the previous draft included securities, tax experts said. The draft GST compensation law said that compensation payable to a state shall be provisionally calculated and released at the end of every quarter, and shall be finally calculated for every financial year after the receipt of final revenue figures, as audited by the CAG.

“Many concerns of the services sector, particularly with respect to single centralised registration and clarity in terms of place of supply rules, have not been adequately addressed. Further changes to this draft cannot, therefore, be ruled out,” said Pratik Jain of PwC.


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