Firms face ban for not passing on GST gains

NEW DELHI: The government has threatened to cancel the registration of entities that do not pass on gains from GST to consumers.

The cancellation of registration is in addition to the power to levy penalty that was prescribed under the law.

The government has repeatedly threatened to invoke anti-profiteering provisions to ensure that gains of GST by way of lower taxes and input tax credit for taxes paid at all stages are passed on to consumers. At the same time, it also wants to ensure that in cases where the levy is going up, companies do not take unfair advantage.

The GST Council has approved a three-stage process with the complaints being first verified by a standing committee of officers. If the panel finds merit, it will be sent to director general of safeguards, which will investigate the case. Based on the report, Anti-Profiteering Authority will decide on the case. From the time the complaint is lodged, the entire process has to be completed in eight months, the rules finalised by the Council said.

Tax practitioners said that cancellation of registration is too harsh, given that the rules are too open-ended. A consultant said in their current form, the provisions can be misused by rivals, who can lodge a complaint against a company, which will have to answer queries.

“The current mechanism is too broad-based and difficult to implement. Can you act against an eatery in Mahabalipuram that does not pass on the gains of input tax credit. The focus should be on sectors such as automobiles, cement, steel and real estate where malpractices are more common and some have a history of pocketing the gains,” said a tax consultant with a global firm.

The government has opted to play it safe with the antiprofiteering provisions as Malaysia saw a price surge in various segments after it introduced GST. Australia had successfully used the clause to ensure that consumer interest was protected.

The tax regime will get a mega launch on the night of June 30, with a special event planned in the historic central hall of Parliament.

Finance minister Arun Jaitley said President Pranab Mukherjee would be on the dais with Prime Minister Narendra Modi.

The PM’s predecessors, Manmohan Singh and HD Deve Gowda, have also been invited for the function, which will see the implementation of GST at midnight.

Former finance ministers, state chief ministers and finance ministers, who have worked on the implementation process for years, have also been invited.

On Monday, the Centre also notified several provisions of the Integrated GST Act to move towards a July 1 launch even as the Jammu & Kashmir government is trying to push for a passage of the legislation to join other states in implementing the tax reform.

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