AIR spotlight summary: Anti Profiteering Authority for GST
Union Cabinet has approved creation of National Anti-profiteering Authority (NAA) under GST, to ensure benefits of reduction in indirect tax rates are passed on to consumers.
The constitution of NAA will bolster the confidence of consumer as they reap the benefits of recent reduction in GST rates.
Goods and Services Tax was introduced across all the countries on July 1st, 2017. It subsumed over a dozen different kinds of taxes particularly Excise, State VAT, and Service Tax into one single Tax which is called GST. There are about different rate slabs and different commodities were categorised under these Tax slabs.
One of the objectives of this GST was to introduce a Single market and a Single Tax regime so that both businesses and consumers can transparently know what the taxes are and how those taxes are to be paid.
Need of an Anti-profiteering Authority
The international experience of GST is that whenever such a Tax is rolled out there is an element of unscrupulous and unprincipled trade and industry which tries to take advantage of the new system by blaming it on the new tax system and they tend to raise prices. So therefore the Government in its wisdom, planned to setup an Authority which would keep an eye on whether trade and industry are taking undue advantage of the new tax regime and raising price to generate undue profit.
This undue profit is on the basis of committing fraud which is after all a crime by deceiving customers in believing that there is a higher tax rate.
The cabinet gave clearance for setting up of an Anti-profiteering authority and it will be assisted by Safeguards authority. Directorate General of Safeguards in the Ministry of commerce has the mechanism to monitor the price behaviour patterns of Trade and industry.
During last GST council meeting held Guwahati, tax rates have been reduced on several items. It is expected that the reduced tax rates will make prices come down. But instead, Trade and industry can also take advantage and make profit out of it. With the introduction of NAA, now consumers will have recourse to justice.
APA is different from consumer court. This APA will have secretarial help from Directorate General of Safeguards.
Consumer Welfare Fund
There is a proposal to create a Consumer Welfare Fund under GST. The NAA authority will have a power of disgorgement. It means when an industry made an undue profit as a result of not passing on the benefit of lower taxes then that undue profit will have to be disgorged by industry. This money can be kept as part of Consumer Welfare Fund.
The success of this authority would lie in its efforts of deterrence
This authority will have to establish difference between genuine profit and an act of profiteering.
NAA has powers to initiate an enquiry and will recommend de-registration of Trade and industry under GST as an extreme step for any repeated violation.
It can also ask the trade and industry to deposit excess profits into Consumer Welfare fund.
It is like a sanction rather than an acknowledgement of a crime on the part of perpetrator. So there would be a penalty attached to it and non-compliance means they cannot carryout business any further.
Deregistration is a very useful step in a sense that the industry will have a fear of making undue profits.
This specific piece of legislation will have to be passed by parliament and then it will become a body.
There is a sunset clause that this body will exist only for a period of Two years from the date of its setting up. The idea is that it should not be permanent body.
So idea is that within two years GST tax will become part and parcel of the system therefore people will not indulge in any profiteering activity using GST as an excuse.
NAA must be backed up with a proper secretariat which does these investigations. The trade and industry will have to justify and establish that any increase in the price was backed up by a genuine increase in the input cost.
We cannot allow the functioning of this authority to act as an agent that dilutes the principle of Ease of doing business.
This authority cannot bring in another inspector raj; this authority will have to keep that in mind so that harassments are kept completely eliminated.
The investigation has to be carried out as per the rule of law. Conflicts with other authorities which are empowered in a similar manner should be eliminated.
It is also important for consumers to take action immediately.