The National Anti-Profiteering Authority (NAA) under the Goods and Service Tax (GST) regime is proposed to be merged with Competition Commission of India (CCI). The NAA was initially set up for a period of two years after the implementation of GST in 2017, to control unfair profiteering by suppliers (where they were not passing on benefits of reduction in tax rates to consumers, etc.)

The NAA essentially works as a price regulator which ensures that any undue benefit is not reaped by companies, due to changes in GST laws. The NAA was subsequently given two extensions and, in September 2021, it was finally decided to extend the tenure of the NAA till November 2022.

Established under Section 171 of the Central Goods and Service tax Act, 2017, the NAA’s functioning has been marred by litigation, with the very constitutionality of the body coming under challenge. The lack of methodology to determine the extent of profiteering by companies has also been a sore point. Further, NAA orders have no right to statutory appeal and, hence, a plethora of writ petitions have been filed challenging such orders before the Delhi High Court. The very foundation of the NAA has, therefore, been the subject of judicial scrutiny.

The CCI, on the other hand, has been maturing in the years since its inception, with prominent orders imposing penalties on companies being regularly upheld in judicial forums. The CCI is a statutory body established under the Competition Act, 2002 with the objective of, among other things, preventing practices by companies which have an adverse effect on competition (like cartelisation, etc), and to ensure freedom of trade.

The CCI is not a price regulator but a referee to ensure fair market practice in a competing trade environment. The CCI also has a clear appellate mechanism with appeals at the first level to the National Company Law Appellate Tribunal, and thereafter to the Supreme Court.

Thus, the two regulatory bodies are operationally different . To bring the two together, a separate wing is likely to be set up in the CCI to handle complaints of GST profiteering. Will the existing practice in the NAA — where complaints are first screened by a State-level committee and then on approval sent to the Director-General of Anti-Profiteering for investigation and then the investigation report sent to the NAA — somehow be merged into the CCI framework? This is riddled with foundational potholes. The CCI, whose focus area is much broader, simply lacks the expertise to interpret GST laws and the passage of GST benefits to the end-consumer. There are a multitude of cases pending before the NAA that will now fall into the plate of CCI, which would have to learn “on the job” to deal with them.

The entire construct seems like the adoption of a troubled child by the competition parent, whose own progeny is hamstrung by the lack of regular officers, lack of expertise in tax and pricing matters, pendency of cases, and further possibility of being overwhelmed with other new responsibilities; there are indications that the CCI may have to regulate e-commerce in India. Given the DNA of the soon-to-be-adopted stepbrother from GST law, this is not going to be an easy task and has the potential of upending the maturity of the CCI gained since its inception. On the face of the objective to reduce regulatory bodies, the CCI would possibly be the nearest parent for the adoption of the NAA. However, the practical challenges need to be addressed first by the GST Council and the courts.

Will the CCI have the bandwidth to deal with this troubled regulatory brother in the long run or will it end up crash landing its own future? All stakeholders, therefore, need to decide with prudence the efficacy of this merger. It may be worthwhile to consider alternative avenues in the interests of both the regulatory bodies.

Bose is Partner, and Chakrabarti is Consultant, Shardul Amarchand Mangaldas & Co

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