Wednesday, 25 May, 2022
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Talk Point: Anti-profiteering body of GST could allow bureaucracy to unleash a tax raj

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Under GST, the government is setting up a National Anti-Profiteering Authority to ensure businesses do not cheat consumers. The new authority will ensure the benefit of reduced prices under the new indirect tax regime is passed on to consumers, said Law Minister Ravi Shankar Prasad.

The authority has the power to impose penalties and even cancel the registration of a business if it does not pass the benefits of GST to consumers. The authority will also devise a method to return the money to consumers.

Will the creation of the National Anti-Profiteering Authority address consumer concerns or will it impair business?

The “anti-profiteering” section of the Central Goods and Services Tax Act, 2017, has been given the green light. The accompanying rhetoric is that a newly constituted three-tiered bureaucratic apparatus called the National Anti-Profiteering Authority (NAPA) will tackle profit hoarding by providers of goods and services, in the form of refusal to pass on the benefits to consumers.

The implementation of “anti-profiteering” measures, as with their inclusion in the GST Act raises concern about imposing another layer of bureaucracy; for having ill-defined rules that will lend itself to bureaucratic discretion or is often the case, abuse; and for adding to the already complicated procedures that the rollout of GST has brought.

One predictable outcome of such a measure will be a plethora of lawsuits. The NAPA rollout comes with stringent penalties for profiteering, that can order a business to reduce prices, refund the money to the consumer with penal interest, pay compensation to the consumer welfare fund, impose monetary penalty, and/or cancel the registration of the assessee.

Their legality is entirely in question, as shutting down a business is a penal provision, and the GST Act, due to opposition, did not enumerate any penalties in the Act. The enabling provision meekly enables NAPA and its subordinates to “examine” profiteering. If the law on enabling rules is applied, the courts should strike down the implementation as exceeding the executive’s jurisdiction.

Here are other sharp perspectives on the National Anti-Profiteering Authority:

Dhruv Rathee: activist and YouTuber
Amol Kulkarni: fellow, CUTS International
Mandar Kagade: consultant with Finance Research Group at IGIDR

Further, the vesting of such adjudicatory powers in a body that is not quasi-judicial, unlike the consumer courts or the Competition Commission of India, rightly raises the spectre of bureaucratic abuse. The question of overlap with these quasi-judicial bodies that are already functioning, is another question mark over the implementation of such measures.

Penalties that may include effectively shutting down a business by cancelling their registration are draconian.

Even the Essential Commodities Act, 1956, a sledge hammer of a legislation from the era of rationing, did not extend penalties to such an extent. The rules give the opportunity to the bureaucracy, if it so chooses – to unleash a tax Raj on every business raising or not decreasing its prices.

The efficacy of these measures is debatable from international precedents – but what is clear is their cost on ease of doing business and promotion of a rule-based system for businesses to function in.

Avi Singh is an advocate who specialises in transnational law and serves as the Additional Standing Counsel for the government of NCT of Delhi.

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