Anti profiteering is an avenue of widespread litigation and subjectivity. The provisions of anti-profiteering are necessary, to ensure that any GST related benefits accrue to the end users, through reduction in end prices and the company does not end up benefiting unduly, due to the change. From a socio-economic perspective, this is a welcome provision. However, it is also equally important to evaluate these provisions, from a legal and taxation perspective, because that is where the implementation lies and any loose ends need to be tied up, leaving no room for doubt.
Now extract of Section 171(1) of the Act, [the anti-profiteering provision] is reproduced below:
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.
Now, this section is under Chapter XXI – "Miscellaneous", whereas the transitional provisions are covered by Chapter "XX". Considering that the anti-profiteering provisions are, at first blush, intended to address the passing of benefits from the changeover to the tax regime, this placement of the provision appears to be inexplicable. Because, at first blush, it then appears that anti-profiteering provisions are not covered by transitional provisions, under GST.
Secondly, the specific wordings of section 171(1) talk about reduction in the rate of tax on any "supply" of goods or services or the benefit of input tax credit.
The word "supply" did not exist in the taxation lexicon, as a specific taxable event, till 30th June 2017, 23:59:59. Until then, we had "sale" of goods, "provision" of services, "entry" of goods, "manufacture" of goods.
On 1st July 2017, at 00:00:00 hours and thereafter, these other words were relegated to the background and the word "supply" came to the forefront and has been there, ever since.
My point is this - Section 171(1) speaks about tax reduction in the rate of 'supply' does not specify reduction of tax, from the taxes charged under the pre-GST regime, to the GST charged under the GST regime.
That being the case, it is possible to interpret section 171(1) in a very watered down manner, to submit that the provision of anti-profiteering has to be tested, not between ST/VAT and GST regime, but between GST at a higher rate on any product/service and GST at a lower rate on any product/service.
And therefore, any query on anti-profiteering, that seeks to compare pre-GST and post-GST models, while the same is covered by the intent of the Government, it does not appear to have the force of law, the way the provision is currently drafted.
It may be argued that preference needs to be given to legislative intent and to the aspect of substance over form and any such drafting lacuna can always be corrected, by way of an explanation or with retrospective effect. However, that does not take away the need for evaluation and interpretation, if such a need arises.
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