The Union Cabinet’s approval for constitution of the National Anti-Profiteering Authority (NAA) is indicative of the shifting focus of the Government to ensure that the benefits of Goods and Services Tax (GST) rates are passed on to end consumers. The NAA is expected to enforce the Anti-Profiteering provisions that were envisaged under the GST regime.

Meaning of Anti-Profiteering measures

The Central Goods and Services Act, 2017 (CGST Act) and corresponding State GST legislations provide that a reduction in GST rates or benefit of input tax credit should be passed on to the recipient by a reduction in the price of the goods or services supplied.

Scheme of Enforcement:

The flow of investigation and adjudication has been given below: 

Anti-Profiteering measures are to be enforced by the NAA by passing requisite orders mandating reduction in prices or ensuring compensatory payments with interest to the recipient. The NAA is also empowered to impose penalty and even issue directions for cancellation of registration if the situation demands it. The NAA is expected to be in operation for a minimum period of 2 years from the date on which the Chairman assumes office.

Comment

With initial teething issues concerning the rollout of the GST law being addressed by the Government in an expedited manner at every GST Council meeting, the focus is now shifting to implementation of Anti-Profiteering measures. This is in line with the larger policy decision that GST was brought about to consolidate all the indirect taxes and reduce the cascading effect and to benefit end consumers.

With states also simultaneously constituting Screening Committees combined with a deadline of 2 years that has been set for the NAA, the expectation is that industries will have to face a fresh onslaught of investigations where their pricing policies will be reviewed to ensure the benefit of reduced rates and input tax credit have been passed on to the recipients. There are reports of initial surveys being conducted by the Revenue for targeted sectors like construction, FMCG and restaurant industry where it is believed that the benefit is not being passed on to the supply recipients.

Further it is crucial for each industry to toe the line by keeping track of the ever-changing GST rates for services and goods. Most of the pre-packaged goods bear MRP labels which is inclusive of tax. The Government expects reduction in GST rates to result in a commensurate lowering of sales price to the customer. Navigating the Anti-Profiteering measures would be difficult for industries in absence of well-defined guidelines and appellate mechanism.