Goods and Services Tax (GST) as the poster boy of Indirect Taxation in India has been in the news constantly since its implementation. The tax came into effect from 1 July 2017 through the implementation of the 101st Amendment of the Indian Constitution. A thorough understanding of GST is a must for successfully pursuing any GST course.
To recall, GST is an Indirect Tax (or Consumption Tax) used in India on the supply of goods and services. The GST replaced existing multiple taxes levied by the central and state governments except for a few state taxes. It is a comprehensive, multistage, destination-based tax.
Now we move on to our main agenda of today, profiteering and anti-profiteering measures that come under the ambit of the GST regime.
Well, to understand profiteering, it’s imperative to understand profit margins. When a company sells products, it gathers a variety of expenses – like those incurred from taxes, building rent, raw material costs, and packaging costs.
Understandably, the company needs to charge a higher price to make a profit. The difference between those expenses and the revenue got from selling the products is the profit margin. Profiteering happens when product prices are inflated unfairly to create a higher profit margin. Companies may do this when there’s a high demand for their products, or when supplies are scarce.
As things stood right after the introduction of the GST regime, opportunities were readily created for profiteering, thus it called for strict measures right away.