The GST still on the way and the companies with bigger and better brand image and full-size manufacturing units are calling for lowered price tags by the vendors to comply with the newly incorporated Anti profiteering clause. The new provision is set to pass the benefits of lowered taxes to the consumers and not to the manufacturers. Srikant Jilla, managing partner, SKP Business Consulting mentioned that, “Many big companies have already calculated the exact impact GST would have on their operations and have even reached out to their vendors, These companies are demanding that the vendors must reduce their price by anywhere between 2-10% as GST would benefit them and then pass it to the company.”
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The big giants of automobile and petroleum are in the first row to ask the vendors to downsize the prices and demanded them to the pass the margin to them for the future calculations and speculations. The activity is going from starting February and firms have calculated all the impact which will be arisen once after the GST will be actually in the game. Sachin Menon, national head, indirect tax, KPMG India, said that, “As per the current regulations no company can profit from lower rate of GST as opposed to the current indirect taxes and will be required to pass on the benefits to the customers, While anti-profiteering provision is present in GST law, there is no clarity around which authority will implement this law and what would be the rules and regulation including the rate of penalty.”
There are some provisions which state that penalties will be applied whenever a company offenses the Anti profiteering clause but there are uncertainties associated with it. An industry expert threw some light upon this and said that “Many larger companies would consolidate their warehousing and hence would see their margins go up. But can the government claim that this is anti-profiteering? And also mentioned that, “However, large companies are demanding that their vendors reduce costs in such a situation. Some vendors may choose to move away from such a company, but most are set to give in to demands.”
