Many companies had approached the Delhi High Court raising questions over the National Anti-Profiteering Authority, especially regarding the lacunae in the methodology of computing profiteering.LawWiser #InConversation with Tarun Gulati, Senior Advocate discusses ‘Anti-Profiteering in FMCG Sector’
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ANTI-PROFITEERING IN FMCG SECTOR – Introduction
Anti Profiteering in the FMCG sector is a concept that was unheard of until sometime back.
Last year, There were news reports that many FMCG sectors were found guilty and issued notices against them for profiteering post-GST.
So what is Anti Profiteering?
It is defined in section 171 of the Central Goods and Sales Tax (CGST) Act. Any reduction in the tax rate on any supply of goods or services or the benefit of the input tax credit shall be passed on to the recipient way of commensurate reduction in prices.
If a business person wants to succeed in his business, then he cannot neglect these concepts.
These concepts have become the need of the hour. Moreover, the cost of fuel and other raw materials is also increasing day by day.
The supplier of goods and services should pass on the benefit of any reduction in the tax rate or the benefit of input tax credit to the recipients by way of commensurate reduction in prices.
Sec 171 is based on the presumption that the tax rates directly affect the price of goals.
Due to lack of clarity, there are many disputes with Anti-Profiteering Authority.
The section, rules, and order passed by the Anti-profiteering authority have been challenged in writ petitions before various high courts.
The main Challenge is the constitution of the Anti Profiteering Authority.
There is no process for appeal/ review and no judicial member part of the Anti Profiteering Authority.
FMCG companies are impacted because of the challenges as there is no clarity on computing the prices.
So, if you are going to invest in the FMCG sector, you should properly understand the different concepts and methods of anti-profiteering.
It would help if you had a clear picture of the methods that would reduce your overall costs but increase your profits simultaneously.
It would help if you also had an idea about the types of products which increase your profit margins. This way, you would be able to grab the profit that is due to you. Also, you would be able to know which products are highly in demand at the moment and which are not.
Once you are done with this task, it is necessary to decide the right product to increase your profit margins.
If you want to increase your profit, it would be better to choose the product with high demand at the moment but a low-profit margin.
In other words, the product should not have very high profits but low-profit margins. This way you will be able to gain maximum profit from your products.
You should also be able to know which will increase profit margins in a short period. This way you can get maximum profits from your sale.
However, if you do not know which will increase profit, you can consult an expert about this. He would help you out with all the required information.
There are also several Anti-Profiteering techniques available in the market that can be used by you or by the Anti-Profiteering Techniques.
However, these techniques might not be efficient enough.