GST 'anti-profiteering' receipts to be split between Centre, states
New Delhi/ Mumbai: Centre and the 'concerned state' will equally share the amount deposited by erring businesses in the consumer welfare fund set up as part of the GST anti-profiteering rules, as per a Finance Ministry notification. Following the rollout of GST in July last year, the government set up a national anti-profiteering authority to penalise businesses for failure to pass on tax benefits to consumers. In case the customer is not identifiable, the money has to be deposited in the consumer welfare fund.
The ministry has amended Central GST rules stating that 50 per cent of the amount is to be deposited in the consumer welfare fund constituted by the Centre and the remaining to the fund set up by the 'concerned state'. As per the amendment, the 'concerned state' would mean the state where the anti-profiteering authority has passed its order against the business. So far, CGST rules did not clearly state on the splitting of the amount collected from erring businesses and consequently deposited in the fund.
As per the structure of the anti-profiteering mechanism, complaints of local nature are first sent to the state-level screening committee while those of national level are marked for the Standing Committee. If the complaints have merit, the respective committees would refer the cases for further investigation to the Directorate General of Anti-Profiteering.
The Directorate would generally take about three months to complete the investigation and send the report to the anti-profiteering authority. If the authority finds that a company has not passed on GST benefits, it will either direct the entity to pass on the benefits to consumers or if the beneficiary cannot be identified will ask the company to transfer the amount to the consumer welfare fund within a specified timeline.
The authority also has the power to cancel registration of any entity or business if it fails to pass on to consumers the benefit of lower taxes under the GST regime, but it would probably be the last step against any violator. According to the anti-profiteering rules, the authority will suggest return of the undue profit earned from not passing on the benefits to consumers along with an 18 per cent interest as also impose penalty.
In case the consumer is not identifiable, the penal amount would have to be deposited to the consumer welfare fund.
Meanwhile, states are likely to gain an additional Rs 37,426 crore in revenue in the current fiscal on the back of surge in oil prices and better tax collection due to the GST, says a report. According to SBI Research, the impact of GST on tax revenue is minimal except in a few states.
As many as 16 of the 24 states, have seen thier revenue increasing over and above the 14 percent baseline/ mutually accepted minimum tax growth rate between the Centre and the states post-GST rollout below which the states have to be compensated.
"We have found that on an aggregate lever, the states have gained by Rs 18,698 crore in additional revenue in FY18. If we combine this figure with the gains that the states have made due to increase in crude prices, the overall figure will be Rs 37,426 crore," the report said.
The amount will be sufficient to neutralize the Rs 34,627 crore of revenue forgone if the states impose VAT only on base the price of crude. Post-GST implementation in July last year, the tax revenue of the states has gone up in FY18 due to increased tax compliance and broader tax base.
While Gujarat, Haryana, Maharashtra, Chhattisgarh, Jharkhand and Punjab have gained the maximum from GST, Karnataka, Bengal, UP, MP and Assam have reported a decline in tax collection post-GST.
These states were impacted due to the changes in the nature of taxation as GST has subsumed indirect taxes such as service tax, VAT, excise duty, entry tax, entertainment tax into one, including the taxes under the Centre and the states which contribute to an aggregate of over 55 per cent of tax revenue of these states.
"We expect that while there is a need to optimise tax revenue, for funding social security programmes, there is also a need to insulate consumers from adverse price shocks," the report said.