GST rate cut: Flipkart, Amazon, Myntra likely to face audit to check profits are passed on to consumers

GST authorities are set to conduct audit of e-commerce companies such as Flipkart, Amazon and Myntra to check if they passed on profits to consumers gained after the Council had slashed the taxes on a host of products. According to a report in the Economic Times, the National Anti-Profiteering Authority has directed the Director General- Audit to conduct the examination.  

Last year in November, the GST council had reduced tax rates from 28 per cent to 18 per cent on 178 items. In the same month, the government set up the National Anti-Profiteering Authority to ensure that consumers get benefit of price cut under the GST.

As per the structure of the anti-profiteering mechanism in the GST regime, complaints of local nature are first sent to the state-level screening committee while those of national level are marked for the standing committee.

If the complaints have merit, the respective committees would then refer the cases for further investigation to the Directorate General of Safeguards. The DG Safeguards generally take about three months to complete the investigation and send the report to the anti-profiteering authority.

If the authority finds that a company has not passed on GST benefits, it either directs the entity to pass on the benefits to consumers or if the beneficiary cannot be identified, it asks the company to transfer the amount to the 'consumer welfare fund' within a specified timeline. The authority has the power to cancel registration of any entity or business if it fails to pass on to consumers the benefit of lower taxes.

Till February this year, the standing committee had received 354 complaints alleging that the benefits of tax cut or input tax credit were not passed on to the consumers. Out of these applications, the standing committee forwarded 65 applications to the DG Safeguards for investigation.

Earlier in March, Minister of State for Finance Shiv Pratap Shukla told the Parliament that the DG Safeguards issued notices of initiation of investigation in 53 cases.  

While conducting the audit, the DG Safeguards usually looks into the balance sheet of the firm, profit and loss account, GST returns and details of invoice wise outward taxable supplies. It also scrutinises the price lists before and after the change in prices is announced. After examining the details, the department gives its report to the Anti-Profiteering Authority for further action.

(With inputs from PTI)