Some restaurants have increased menu prices despite a cut in GST rate to 5%, claiming that non-availability of input tax credit has raised costs
The government has received 31 fresh complaints under GST’s anti-profiteering mechanism, for not passing on to consumers a reduction in price after rate of over 200 items were cut less than two weeks back.
“We will look at 70 complaints, including 31 fresh cases reported since November 15, especially against restaurants and some real estate companies,” a senior government official told Moneycontrol.
In a major relief to businesses and consumers, on November 10, the Goods and Services Tax (GST) Council--the apex body for decision making headed by finance minister Arun Jaitley--cut rates of 211 mass consumption items.
Items of common use including furniture, sanitary ware, electrical fittings, detergents, marble flooring and toiletries, among others were shifted to a lower tax bracket of 18 percent from 28 percent. Alongside, taxes on six items were cut from 18 to 5 percent, in eight items from 12 to 5 percent and from 5 to zero percent in six items.
The Council also decided to impose a uniform GST rate of 5 percent across all categories of standalone restaurants — air-conditioned and non-air-conditioned — but withdraw the benefits of input tax credit (ITC) from such businesses.
The decision was taken as the Council had gathered that restaurants were not passing on the benefits of ITC to customers and had linearly raised their meal rates after GST became effective from July 1.
The massive revision in rate came into effect on November 15.
Following the recent tax cut, the government pinned the responsibility of reduction in prices on consumer goods. Failing to the lessen prices may could lead to anti-profiteering action.
Under the GST-related laws, the government had introduced an anti-profiteering clause into order to ensure that businesses transfer the benefit of tax credit to consumer by making products cheaper.
However, particularly restaurants have increased prices in their menu as they claim that unavailability of ITC or tax credit has forced them to take the step. The government has, however, warned that if the price rise is beyond the taking into account the lack of tax credit, action could be taken against them.
The Cabinet has recently approved setting up of National Anti-Profiteering Authority (NAA) in a bid to ensure that businesses pass on the benefit of the recent tax rate cuts to the final consumers.
NAA will be headed by a senior officer secretary-level official, with four technical members from the Centre and states. Appointment of these top five officials will be notified this week.
The framework of the body comprises a standing committee, screening committees in every state as well as the Directorate General of Safeguards.
If consumers feel that the benefit of reduction in tax rate is not being passed on to them, they can approach the state’s screening committee for relief.
However, in case the incident of profiteering relates to an item of mass impact with 'All India' ramification, the application has to be directly sent to the standing committee. If the committee is able to conclude that there is an element of profiteering, then the matter will be referred for detailed investigation to DG Safeguards, which shall report its findings to the NAA.Further, if NAA confirms there is a necessity to apply anti-profiteering measures, it has the authority to order the accused business to reduce its prices or return the undue benefit availed by it along with interest to the recipient of the goods and services.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.