Opening a new chapter in consumer protection, the Union Cabinet on Thursday gave its nod for constituting a National Anti-Profiteering Authority (NAA) to ensure that the full benefits of input tax credits and reduced GST rates on supply of goods or services flow to the consumers.
This nod is timely as it comes on the heels of the GST Council announcing tax rate cuts on 178 items from the maximum rate of 28 per cent to 18 per cent. Several items in 18 per cent tax slab have also been lowered to 12 per cent.
Over the last three meetings in recent months, the GST Council had reduced rates on about 300 items. This has raised the question of whether the businesses would promptly pass on the benefit of reduced rates to consumers.
But, the devil lies in the detail. All eyes, especially those of anxious businesses, are now on the government to see what methodology would be used to decide whether profiteering has occurred or not, say tax experts.
Different countries have adopted different approaches to determine whether profiteering has occurred or not under a GST regime. For instance, Malaysia has opted for a methodology where profiteering would be determined on the basis of “profits” made by a company in a quarter before and after GST implementation.
On the other hand, Australia, which went in for GST 15 years back, had decided on profiteering based on “exploitative pricing”, sources said. India will have to take a call whether it wants to go the “profits” or “pricing” way for this purpose.
Reassuring consumers Briefing reporters on the Cabinet decision, Ravi Shankar Prasad, Union Minister for Law & Justice and Information Technology, said that the establishment of the NAA is one more measure aimed at reassuring consumers that the Government is fully committed to take all possible steps to ensure that benefits of GST implementation in terms of lower prices of goods and services reach them.
The NAA will be headed by a Secretary-level senior officer with four Technical Members from the Centre/or the States.
MS Mani, Partner, Deloitte India, said the establishment of the NAA is very timely as the reduced rates of GST have come into force from Wednesday. “In addition to the establishment of the NAA, it is now expected that the Government will soon notify the methodology to be used to determine whether profiteering has occurred,” Mani told BusinessLine .
Aditya Singhania, DGM-GST, Taxmann, said the measure will certainly keep a check on inflation as there will be monitoring on the prices of products for which rate cuts have happened. Saloni Roy, Senior Director, Deloitte India, said that rules are expected to be released on anti-profiteering.
“These rules are already fairly delayed which has led to confusion on how to interpret this (anti-profiteering) concept. Anti-profiteering provisions are not new, and exist even in Malaysian and Australian GST/VAT laws — however rules differ,” Roy said.