The Central Goods and Services Tax (CGST) Act, 2017, under Section 171, mandates that any reduction in the rate of tax or any benefit of input tax credits (ITC) must result in a commensurate reduction in the price of goods or services supplied by the registered person. This anti-profiteering provision ensures that the benefits of tax reduction or input credits are passed on to the consumers.
Two new notifications, No. 19/2024 and No. 18/2024 issued on September 30th, 2024, introduce significant changes in the handling of cases related to the anti-profiteering measures and examination of input tax credit (ITC) benefits.
Notification No. 19/2024 – Central Tax
Date Issued: September 30th, 2024
Effective From: April 1st, 2025
This notification marks a crucial shift in the way anti-profiteering complaints will be handled going forward.
- Objective: It specifies that from April 1st, 2025, the Authority under Section 171 of the CGST Act will cease to accept any further requests for examination regarding whether a reduction in the tax rate or the availing of input tax credits has resulted in a proportional reduction in prices.
- Impact: This means that taxpayers will no longer be able to submit complaints to the anti-profiteering authority after the specified date to investigate whether the tax savings or input credits have been passed on to consumers in the form of reduced prices. It implies the phasing out of the anti-profiteering mechanism established under Section 171 of the CGST Act.
Notification No. 18/2024 – Central Tax
Date Issued: September 30th, 2024
Effective From: October 1st, 2024
This notification empowers the Principal Bench of the Appellate Tribunal to take on cases related to the determination of whether input tax credits or tax rate reductions have been passed on to consumers.
- Objective: As per the notification, the Principal Bench of the Appellate Tribunal, constituted under Section 109(3) of the CGST Act, will now have the authority to examine whether the input tax credits availed by any registered person or the reduction in the tax rate has resulted in a commensurate reduction in the prices of goods or services.
- Role of the Appellate Tribunal: The Tribunal will essentially step into the role of determining whether the taxpayer has complied with the anti-profiteering provisions, ensuring that consumers benefit from tax savings in terms of lower prices.
Key Takeaways
- Transition to the Tribunal:
- Starting October 1st, 2024, the Appellate Tribunal will be empowered to handle disputes related to the passing of benefits from input tax credits or tax rate reductions to consumers. This shifts the focus from the anti-profiteering authority to the Tribunal for such matters.
- End of New Requests to Anti-profiteering Authority:
- From April 1st, 2025, the anti-profiteering authority will no longer accept new requests to investigate whether tax benefits are passed on to consumers. This indicates a closure of the existing framework under Section 171.
- Focus on Compliance:
- Businesses will still need to ensure compliance with anti-profiteering provisions up until the cutoff dates and ensure that they pass on the benefits to consumers. Non-compliance could still be contested in the Appellate Tribunal until April 1st, 2025.
- Long-term Impact:
- These changes indicate a significant shift in the GST regime’s enforcement. The gradual phasing out of the anti-profiteering authority suggests that the government is moving towards a more simplified and Tribunal-based resolution process.
With these new notifications, the Central Government, in collaboration with the GST Council, is modifying the handling of anti-profiteering complaints and ensuring a streamlined system for determining the rightful benefit of input tax credits and tax rate reductions to consumers. Businesses need to remain vigilant and ensure that they comply with the anti-profiteering provisions until the prescribed dates, and future cases will now be handled by the Appellate Tribunal. These changes are aimed at enhancing the overall efficiency of the Goods and Services Tax compliance framework.
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