Question

how does credit work between a customer and a shopkeeper? ​

Answer 1

The technical intent is, since costs of some products have come down due to GST, ie. mainly the Excise element of production credit, the same should have been transferred to customers.

For example, restaurants charged 12% VAT and 15% service tax with abatement, which would be roughly 21%. This should have reduced to 18% in restaurants after GST.

But essentially what has happened is the MRP has remained steady, ie. the benefits have been absorbed by the distribution chain. And where the input credits are blocked, the prices rise. So the customers haven't benefited.

So the Government started the anti profiteering mechanism. The full effect of it will only be seen in time, since it will require a stricter but automated GST compliance mechanism, and an easier return filing system. Something like a single form for GST using only sales data (purchase would be automated by the sales of supplier), creating invoices online, and disallowance of ITC be only quarterly so that all return issues are handled when everyone has finished return filing.

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