Within a fortnight of GST rate cut on COVID-19 essentials, including medicines and oxygen, the GST anti-profiteering authority has urged field tax officers to collect evidence against suppliers who have not reduced prices. The Central Board of Indirect Taxes and Customs (CBIC) had on June 14 notified reduced GST rate on 18 COVID-19-related supplies like Remdesivir and Tocilizumab drugs as well as on medical oxygen, and oxygen concentrators.
In an office memorandum, the National Anti-Profiteering Authority (NAA) said the suppliers are required to commensurately reduce the prices of each of the supplies of goods and services made by them so that the benefit of reduction in tax rates and or of input tax credits is passed on to the consumers. “Request you to take all possible steps envisaged under the GST laws to ensure that the legislative intent of Section 171 of the CGST Act is complied with,” the NAA said in the office memorandum.
Through the memorandum, the officers have also been asked to take action as mandated under Section 171 of the CGST Act and wherever required, to utilise the powers conferred vide provisions of Section 67(12) of the CGST Act for collection of evidence, which may be required to take action against errant suppliers of various goods and services. Section 171 of CGST Act, 2017, provides that any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.
Section 67(12) authorises an officer to purchase goods from the business premises of any taxable person, to check the issue of tax invoices/bills of supply. The other items on which GST was cut was hand sanitiser, pulse oximeters, BiPAP machine, testing kits, ambulances and temperature check equipment. These concessional rates would be applicable till September 30, 2021.
On June 16, drug pricing regulator NPPA had also asked pharmaceutical companies and medical device makers to reduce prices on products on which the GST has been lowered in order to pass on the benefit to the consumers. The National Pharmaceutical Pricing Authority (NPPA) noted that a change in tax rates has an impact on the fixation of maximum retail prices (MRP) of various drugs and formulations.
AMRG & Associates Senior Partner Rajat Mohan said the GST Council had approved concessional tax rate on these items but an immediate effect in terms of price cut was not seen in most of the items. “National anti-profiteering authority in charge of the anti-profiteering provisions has requested tax officers to take stern action against delinquent manufacturers and traders in the pharma sector,” Mohan added.
Jurisdictional tax officers are under a national duty to penalise errant taxpayers, ensuring that benefit of this rate reduction can reach at the grass root level, Mohan added. Deloitte India Senior Director M S Mani said businesses dealing with medical supplies that have undergone a GST rate reduction need to ensure that they have adequate documentation to demonstrate that the rate cuts have been passed on to the consumers.