Anti-Profiteering Authority for GST
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Over a dozen different kinds of taxes particularly excise, state VAT, service tax were subsumed into one single tax which is called Goods and Services tax. One of the objectives of GST was to introduce single market and single tax so that both businesses and consumers can transparently know what the taxes are and how the taxes are to be paid to be collected by government.
Now along with the launch of GST, the question arose about undue advantages taken by trade and industry due to change in tax regimes. The international experience has shown that whenever such a tax is rolled out, there is an element of unscrupulous and unprincipled behaviour in trade and industry. It tries to take advantage of the new system by blaming it on GST or on the new tax system and thereby raising prices. So the government in its wisdom from experiences introduced the anti–profiteering authority which would keep an eye on whether trade and industry.
National Anti-Profiteering Authority
The National Anti-Profiteering Authority shall be a five member committee consisting of a Chairman who holds or has held a post equivalent in rank to a Secretary to the Government of India. It will be assisted by Safeguards authority (ministry of commerce) which has a mechanism to monitor the price behaviour pattern of the industry. This body will actually address all complaints from consumer, thereby acting as a consumer redressal body.
This institution is not about tax collection or tax not being paid. It will monitor that price remain under check and businesses do not pocket all the gains from GST.
For instance, GST council decides to reduce taxes on about 211 items. Thus it is expected that those things will become cheaper. But when it doesn’t happen and instead the trade and industry take advantage of it by saying that no such price reduction is actually going to happen, the consumers can take recourse to justice. It can use consumer protection act but it can go to the authority directly too.
It is going to be very difficult exercise for this authority because to establish profiteering is a difficult task. It will have secretarial help from the directorate general of safeguards. There is a thin line that separates profiteering and profits. Thus, the authority will have to establish that whether there was genuine profit in some cases or was it an act of profiteering. They will initiate the inquiry and the powers that they will have will not be the same powers as the GST directorate or the GST network people. They will have the power to recommend de-registration of trade and industry under GST so that will be probably the most extreme step because the de-registration means seize to do business. The success of the authority will lie in its effects of deterrence where a large number of trade and industry will desist from indulging any activity that might be taken to the anti- profiteering authority.
If anti profiteering is established, the trade and industry has to return that money and if possible to identify the consumers who are affected so to reimburse their cost or ask the trade and industry to deposit that money in the consumer welfare fund. There was an unjust enrichment fund which set up in 1991, where penalties of industries not passing on the benefits of lower taxes were being deposited. So that fund already exist. Probably anti-profiteering authority will have to revive that fund and ensure if there is any anti profiteering case, the unjust gains of industry and trade can be deposited in that fund. So it’s like sanctioned rather than an acknowledgement of crime on the part of profiteers. There will be a penalty attached and non-compliance to rules means that business cannot be carried out any further.
The cabinet has given a clearance and should be passed by parliament to become a statutory body. This has got a sunset clause that this body will exist only for period of 2 years from the date of it setting up. The idea is that in 2 years’ time, the new tax system will be settled smoothly with the trade and industry and therefore they will not indulge in any profiteering activities using GST as an excuse. A while ago, government reduced GST upto 10% in many products. Hence it is incumbent on the part of the government to see that the benefit are passed on to the consumers. For example the restaurants AC restaurants had to pay GST of 18% and there was widespread fear and concern that restaurants were inflating the bills even if they were not air conditioned by charging 18% GST. Now when this was reduced to flat rate of 5% but not entitled to any IPC, restaurants once again found a way to increase price by stating that as they did not get benefit, they have higher costs. This is a fit case for anti-profiteering authority to look into whether there is genuine extra costs incurring or it is just undue price gains.
Anti-profiteering authority must be backed up with a proper secretariat, investigation capacity, just like competition commission of India or any other regulator. This is an elaborate exercise and cannot be done in a hurry. It will require consultation, hearing process, investigation, establish facts there prices have exceedingly increase and justify the rise. It will have to examine the books of accounts and the trade and industry will have to justify and establish that any increase in prices is backed up by genuine increase in their costs or denial in benefits as the result of new GST regime. The functioning of the authority to act as rigid power that dilutes the principle of ease of doing business will not be helpful. Any inclination towards likes of inspector raj or harassments have to be completely eliminated.
Connecting the dots:
- Determine the importance of anti-profiteering authority in GST.
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