Pyramid Infra goes to court over GST anti-profiteering mechanism

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GST

   A real estate company has dragged the government to court over the constitutional validity of the anti-profiteering mechanism under the goods and services tax.

   The anti-profiteering provision requires companies to pass on the benefits of a cut in the GST rate to customers.

   Pyramid Infrastructure filed a writ petition in the Delhi High Court on October 12, claiming the anti-profiteering mechanism lacks clarity and violates the fundamental rights of citizens such as freedom of speech and equality.

   “The issue of constitutional validity was argued today before the Delhi High Court,” said Abhishek A Rastogi, a partner at Khaitan & Co. who filed the writ for Pyramid. The court will decide on the validity of the provision in the absence of a methodology to determine the quantum of anti-profiteering, he said.

   The petition claims there is no machinery and procedure to be followed for assessment of amounts payable as fines.

   The section in the GST Act dealing with anti-profiteering states: “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 (consumer) by way of commensurate reduction in prices.”

   Some companies have roped in tax experts to clarify doubts such as whether cross-subsidising products is permitted and the duration within which the benefits have to be passed on to consumers.

   For services companies such as telecom consultancies and banks, the problem could be more complex because of the wider scope for input tax credits.

   They can seek tax credits even on capital expenditure — there was no such concept earlier for services — to offset future GST liability. Besides the uncertainty over anti-profiteering norms, many companies are unsure if they can offset input tax credit against higher compliance costs.

   “In case the National Anti-Profiteering Authority passes some order based on wrong ratios or parameters, the entire environment could become detrimental to businesses,” said Rastogi.

   Companies including Hindustan Unilever, Hardcastle Restaurants and Jubilant FoodWorks have faced penalties under the anti-profiteering mechanism. People in the know say that some major consumer goods companies are now looking to come together and file a separate writ petition challenging the mechanism.

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source: Economic Times

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