Regarding Anti Profiteering

[Prashanth Jadhav]

Dear Sirs,

We had received a Purchase Order for supply of IT Hardware goods in February 2017. With the delivery Date being 05/07/2017.

The Purchase Order Had Expired after this date due to site readiness issues at the customer end.

The Purchase order was amended so that the delivery can be carried out. The revised purchase order mentioned SGST 9% and 9% CGST applicable with the purchase price remaining the same.

Based on this the materials were delivered to the customer on 19/03/2018.

While we had submitted our invoice for payment realization, the customer has with held the Tax component and released the base value of the product.

The reason behind it is they would want credit for CVD and SAD components as the PO was placed during the VAT regime.

Request you to please advise on the validity of this demand by the customer and his holding of the taxes.

On our part since they had issued a revised PO we had purchased the goods under the GST regime for the whole chain (Supplier, Distributor and Importer)

Please let us know if the customer is correct in his claim that it attracts anti profiteering clause.

Warm regards,

[CA Karan]

Anti-profiteering applies in cases where the amount of tax is in-built in the price and the credit of the same is now being allowed due to introduction of GST. Such benefit is required to be passed on. In your case, since the entire transaction is under GST, the taxes would not be forming part of the cost and thus are not required to be passed on.

[Yash Jain]

Dear Sir,

Per Se, it appears that the contention of your customer will not hold good and following are the reasons ,

1. CVD and SVD have been subsumed in GST : Now CVD and SVD Will form part of Cost of your product as you have imported them in pre GST Regime and must not have taken the Credit of Same in trans 1. Hence they will form Part of Cost of your goods.

(However if you have taken CVD and SVD Credit in trans 1, then please reduce the price by giving credit note to customer to that Extent).

2. Anti Profiterring mechanism : As per information from Net, the same is yet to be drafted under Rule 129. A format wil be notified in which data have to be prepared to know whether the benefit of reduction in taxes have been passed to customers.
3. What is anti Profiteering : It generally means that the “Cost price” of the seller remains same irrespective of whether the taxes increase / decrease. Say, in some case, when GST was reduced from 28% t0 18%, there was no reduction in price of Pizza by a popular pizza chain, which means that it earned profit by increasing prices in ratio of “Decrease in taxes”
4. Your case : It does not appear that you are charging high to customer in post gst Regimer as your cost structure in PO Remains same (As you have said base price has been paid by customer). Hence customer is not correct in saying that you have engaged in Anti profiterring. (Subject to Point 1)

Comments From esteemed members highly solicited

[Ganeshan Kalyani]

He would have claimed cvd and sad thru tran1. So he should not withheld the said tax component. This is my view.

AI Summary

Customer Wrongly Withholds Tax on IT Hardware Order; Experts Clarify GST Applies, Not VAT Credits A company received a purchase order for IT hardware in February 2017, with delivery scheduled for July 2017. Due to site readiness issues, the order was amended for delivery in March 2018 under the GST regime, applying SGST and CGST. The customer withheld the tax component, seeking credit for CVD and SAD from the VAT regime. Experts advised that anti-profiteering does not apply here since the transaction falls under GST, and the customer's claim is invalid unless CVD and SAD credits were taken in trans 1. The customer should not withhold the tax component.