Looks like all major eCommerce companies including Flipkart, Amazon and Myntra have encased themselves in the anti-profiteering watch-list!
Last year GST council had cut the taxes on 178 products. In consonance with recent reports, eCommerce companies such as Amazon Inc. (NASDAQ:AMZN) and Myntra are likely to face an audit by tax authorities to check if they have passed on profits gained after the tax cut in Goods and services tax (GST) rates to consumers.
The National Anti-Profiteering Authority has directed the Director General-Audit to be on the catch-bird seat of the examination.
eCommerce Players In India: Under Eagle-Eyes!
Seems like the eCommerce space of India, spreading itself with innumerable products each day, will witness a debatable about-face!
The GST Council decided to slash tax rates on an array of domiciliary products like chocolates, toothpaste, shampoo, washing powder, shaving creams and other 173 products to 18 per cent, from 28 per cent towards the end of last year. Additionally, in the last meeting of GST Council, many more such products were either shifted to a lower slab or were completely wiped off of the slate.
Reportedly, Tax authorities will scrutinize e-commerce companies in order to ensure that the benefits of tax cuts are properly passed on to consumers. In cases where authorities will fail to identify consumers, companies will have to deposit the benefits into the consumer welfare fund.
Nuts-Bolts of GST’s Profiteering Mechanism
National Anti-profiteering Authority (NAA) is the top decision-making body under GST’s anti-profiteering mechanism and is headed by B.N Sharma, Chairperson and a bench of four technical members. The anti-profiteering clause was introduced into the picture in order to ensure that tax credit benefits are suitably transferred from businesses to consumers, by slating cheaper products.
If consumers, at any given point of time, feel that they are unable to relish the benefit of a rate cut then the state’s screening committee can walk in as the saviour. Till now, the government has received more than hundred complaints under GST’s anti-profiteering mechanism.
“The objective is to check if excess amount collected before rate reduction has indeed been refunded to buyers or not. Hence, it becomes critical for e platforms to examine this aspect and refund the amount ( if required) as soon as possible.”- Anita Rastogi, indirect tax partner, PwC.
Till February this year, the bench has received allegations against companies, for not passing on benefits of the tax cut or input tax credit, and out of about 354 complaints, the standing committee has put aside 65 applications, to be forwarded to DG Safeguards for further investigation. The Minister of State for Finance, Shiv Pratap Shukla notified the Parliament, that the DG Safeguards have initiated the investigation in about 53 cases.
While conducting the audit, the balance sheet of the company, profits and loss accounts, GST returns and details of invoice-wise taxes are scrutinized. In addition to all that, the price lists before and after the change in prices are also gone over with a fine-tooth comb. After satisfactory examination details, the department forwards its reports to the Anti-Profiteering Authority for further action.
Story In Sight
GST is one of the most complex tax systems in the world. Apparently, with GST and its whole camaraderie of various processes, it is one hard nut to crack for the eCommerce ecosystem of India. No matter how complicated the whole thing seems, Tax Experts claim that educating consumers about GST, tax cuts and illegal profiteering will transcend the present scenario.
Companies and tax consultants have started looking out for ways, on how to make the best use of the mechanism to protect their margins and at the same time, stand rooted on the right side of the law.