Companies may face higher penalties for not passing on GST rate cuts

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The Finance Ministry is considering an amendment in the law to raise penalties against companies that fail to pass on GST rate cuts to consumers. At present, the penalty for such an act is 10,000 or the amount of tax evaded, whichever is higher.

“The proposal is to bring an amendment in the Finance Bill to raise the penalty from 10,000,” a senior government official told Business Line. Earlier this week, officials from various ministries including Finance and Law discussed the proposal.

One of the key concerns behind this move is that companies often do not pass on the entire benefit of tax cuts. “Sometime companies claim that the cost of manufacturing has gone up, which is why they are not able to pass on the tax cuts. In this process they make hundreds of crores of rupees unlawfully, which is not acceptable,” the official said.

There are also allegations that post rate reduction, companies sometimes lower prices selectively. For instance, they may cut the price of larger packs but not smaller ones, or cut the price of one brand but not the other. “These practices have to be stopped and the required deterrents have to be created,” the official sad.

Inflation fears

Another official said that not passing on the benefits also contributes to inflation as well as inflationary expectations. Though the retail inflation is below 5 per cent at the moment, the inflationary expectation is high because of higher fuel prices and declining rupee. “Steps need to be taken to ensure that inflation is not due to reasons which can be controlled domestically,” the official said.

At present, there is a National Anti-profiteering Authority to check whether the reduction in tax rates or benefit of input tax credit is being passed on to the consumers. Till date, 32 screening committees have been set up — 29 is States and three in Union Territories (Delhi, Puducherry and Chandigarh). It has passed orders in some cases while hearing is going on in over 130 cases.

Read More at: https://www.thehindubusinessline.com/economy/companies-may-face-higher-penalties-for-not-passing-on-gst-rate-cuts/article24822940.ece