Top cos take on govt over GST anti-profiteering | Economic Times

Mumbai: The Delhi High Court on Monday said it would jointly hear some of the issues on anti-profiteering raised by 44 top Indian companies sparking what might be a long drawn battle with the indirect tax department over Goods and Services Tax (GST).Petitioners challenging the Indian indirect tax department over anti-profiteering under GST include Pyramid Infrastructure, HUL, Abbott, Johnson & Johnson, Philips, Acme developers, Samsonite, Jubilant Foods, Reckitt Benckiser and Patanjali.Earlier, these companies approached the high court individually after they were penalised under the anti-profit mechanism of the indirect tax department and their petitions are now being clubbed together for the court hearing.Most of the companies are challenging the tax department on two main issues — Constitutional validity of anti-profiteering mechanism and the absence of precise regulations and methodology to determine if benefits have been passed on to the end consumer.“It was broadly agreed that the court can first decide on the Constitutional validity of the anti-profiteering provisions and thereafter, each petitioner may submit on the specific points to determine the quantum of profiteering. 77733646For completeness, both the Constitutional aspect and the quantum of profiteering perspective are important,” said Abhishek A Rastogi, partner, Khaitan & Co, who is arguing on behalf of seven petitioning companies. The high court said that all questions of Constitutional validity will be jointly finalised by the petitioners and served to the government before the next hearing on November 3. “There are many aspects which are subject matter of these appeals under antiprofiteering, including the Constitutional validity of the provisions and lack of precise methodology to determine the amount alleged to be 'profiteered'. For example, whether the profiteering should be computed at product level, portfolio level or at entity level is one critical issue. Pricing is an amalgamation of complex commercial and economic considerations in addition to tax and it will be interesting to see how the court will look at the matter” said Pratik Jain, partner and leader, indirect tax, PwC India. As per the GST framework, benefits of the rate reduction have to be passed on to customers. If a company is unable to do so, penalties can be levied along with interest for profiteering from the tax regime. 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.”Input tax credit is a mechanism under the GST framework wherein the tax a company pays when it buys raw materials or other services can be passed on to the buyer when goods or services are sold. The National Anti-profiteering Authority (NAA) has been fining companies found to be benefiting from GST and these had not passed on the benefits of the tax or input tax credit to the end consumers. Each of the companies that approached the court will be required to prepare a short submission for arguments at the first stage on the Constitutional validity. Thereafter, after crossing the first leg on Constitutionality, the Delhi High Court would decide to go into details of each petition, said legal experts. “The next hearing is very critical and will set the tone of the decision from Constitutional and other aspects such as absence of judicial members in NAA”, said Rastogi.