ANTI- PROFITEERING IN GST

ANTI PROFITEERING Clause 171 in the GST bill which provides that it is mandatory to pass on the benefit due to reduction in rate of tax or from ”INPUT TAX CREDIT” to the consumer by way of proportionate reduction in prices. OBJECTIVE: To protect consumers from inflation after GST implementation

COMPUTATION – change rate Particulars Old System Anti Profiteering System Purchase Price (assumed) 100 Excise in Purchase @ 10% 10 - Price for VAT / GST 110 VAT on Product @ 10% / GST @ 12% 11 12 Final Sale Price 121 112 Benefit to Customer 9

COMPUTATION – input tax credit Particulars Old System Anti Profiteering System Input Tax Credit (Excise)/ GST 100 320 Input Tax Credit (Service Tax) - Input Tax Credit (VAT) Total Credit 300 Benefit to Customer 20

COMPUTATION -transition Particulars Old System Anti Profiteering System Purchase Price (assumed) 105 Tax in Purchase (105*5/105) 5 Net Purchase Price 100 Net Sale Price assuming 10% profit 115.5 110 Tax on Sales @ 5% 5.78 5.5 Final Sale Price 121.28 Benefit to Customer

COMPUTATION – same rate Particulars Old System Anti Profiteering System Purchase Price (assumed) 100 Excise in Purchase @ 10% 10 - Price for VAT / GST 110 VAT on Product @ 10% / GST @ 20% 11 20 Final Sale Price 121 120 Benefit to Customer ?

How does it work ? As per Malaysian Regulations of Price Control & Anti Profiteering, 2014- Unreasonable Profit is calculated by- Evaluating Profit Margins between 01/07/2017 to 31/12/2017 Compare to Net Profit Margin – 01/04/2017 to 30/06/2017 (excluding Taxes) does not exceed margins as on 31/03/2017 Net Profit Margin – 01/07/2017 to 30/09/2017 (excluding GST) does not exceed margins as on 30/06/2017

ANTI PROFITEERING - ISSUES COST SHEET: Pre and post GST cost sheet of each product to calculate the pre-GST tax rate and post-GST tax rate for each and every item to understand the quantum of tax benefit that a supplier should get and pass on PROFIT CALCULATIONS: Will it be net basis or gross basis WHEN TO PASS ON THE BENEFIT?

ANTI PROFITEERING - ISSUES Anti-profiteering is a transitional provision?? Rules Not Specified Establishment of an authority against anti-profiteering in order to ensure its compliance – CCI? Movement in prices due to demand-supply scenario, competition, prices of a commodity in international markets, the level of the currency and so on?