CUTS International demands to pass benefits of tax rate reduction to consumers

KNN, September 23, 2020

CUTS International has expressed its deep concern with regard to the benefits of tax rate reduction not passed on by dealers to consumers by way of actual reduction in the price of the said goods or services supplied by them.

”44 companies have unfairly challenged the findings of the National Anti-Profiteering Authority of India in the Delhi High Court. The Authority has found that savings as a result of lower tax incidence have not been passed to consumers thus enriching themselves unfairly,” said CUTS Secretary General, Pradeep S Mehta in a statement.

Mehta said that CUTS will intervene in the matter in the High Court to defend consumers’ rights to be charged appropriate prices and support the Authority.

As a learning from the VAT experience, legal teeth were provided in GST law by incorporating anti-profiteering provisions to check profiteering by businesses when GST was being rolled out in the country.

Section 171 of CGST Act, 2017, provides that 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.

“Several cases of profiteering by dealers not passing on the benefit of tax rate reduction to the consumers in the wake of implementation of VAT in the country are mentioned in a Study Report titled ‘Implementation of Value Added Tax (VAT) in India-Lessons for transition to GST’ released by the Comptroller & Auditor General (C&AG) of India  in June, 2010”, Mehta asserted.

The clause provides that suppliers cannot be benefited by availment of Input Tax Credit at the expense of the recipient and commensurate benefit should be passed on to the recipient with appropriate reduction in the supply price of goods or services or both.

Right of availment of Credit rests with the supplier only to pass on the benefit to the consumer and not for holding it in his own account. Supplier is bound to act as a pass through or an agent and actual benefit should go to the consumer.

However, certain companies have challenged the constitutional validity of the provision of CGST anti-profiteering through writ petitions and the anti-profiteering rules questioning the constitutional validity and point out the lack of methodology and procedure for determination whether reduction in the GST rate or the benefit of input tax credit to be passed on by the registered person to the recipient by way of commensurate reduction in prices. Companies have argued these are in violation of Articles 14, 19(1) (g), 265, and 300A of the Constitution of India.

“Anti-profiteering provisions are a positive step towards protecting consumer interests and rein in unjust enrichment, so that GST does not add to inflation in the economy”, said Mehta.

‘The intent of the government is to curb inflationary pressure and provide a sigh of relief to the consumers. It needs to be encouraged and supported by the Companies in order to maintain the economic balance, particularly in this pandemic ridden economy, as many consumers are without any jobs or income”, he added.

This news item can also be viewed at: