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Thursday, December 14, 2017

Anti-profiteering body

Saturday, 02 December 2017 11:57
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The operationalisation of the National Anti-profiteering Authority (NAA) by the Government under the provision of Goods and Services Tax (GST) regime has created a worry among the traders and manufacturers across the country. So far as its operation under the GST regime for passing on the tax benefit to the consumers is concerned, it is a welcome step but its implementation in the right earnest will depend on the manner in which it is taken by the elements of the central government. Apart from this, there is also an element of cooperation from state governments which can check heavy taxation and profiteering on some of the goods that have been exempted from the higher slab of GST for the benefit of consumers. The NAA, whose constitution was approved by the Cabinet last Thursday, is empowered to crack down on firms that fail to pass on the 'benefits' of the tax regime to consumers. The authority can also order businesses to reduce prices of products or refund to consumers 'undue benefits'; in extreme cases it can impose a penalty on errant firms and cancel their registration as taxpayers. In the cases where consumers are difficult to trace individually, the amount construed by the authority to be the extent of undue benefit will be deposited in a consumer welfare fund. The authority will have its own bureaucracy - including a screening committee in each state that consumers can complain to. Besides this, a standing committee in which profiteering allegations with an all-India impact can be taken up and an investigation wing that will vet complaints with prima facie merit and report its findings to the NAA. More clarity is needed on how the government will ascertain the difference between undue profit and fair play - or the discretionary space available to the NAA could enable rent-seeking. In fact, working of this authority comes in conflict with the Consumer Affairs and Public Distribution (CAPD) departments at the state which have been fixing the process of essential commodities in consultation with the consumer organisations. Clarity is also needed on the functions and powers of this authority and the CAPD bodies in the states, where they have been working efficiently and to the satisfaction of the consumers. Such an authority will be beneficial for the consumers in states where no such mechanism exists. Moreover, the centralised working of NAA will have a bearing on the functions of the CAPD bodies which have been enjoying autonomy in their states as part of the federal structure that allows them independence in discharge of their functions. At this stage, it is quite clear that initiative for setting up the authority is the recent large-scale reduction in tax rates on more than 300 items, of which about 200 rate changes were to come into effect from November 15, 2017. The central government appear to be keen in ensuring that consumers have a better perception of the GST's ground-level impact. The Union Finance Secretary Hasmukh Adhia has urged companies particularly those in the fast-moving consumer goods segment to ensure that new maximum retail prices are printed on products from November 15, even on existing inventory in the market. At this stage, the wholesalers can still implement these directions from the centre, reaching every last retailer in the market is a challenging task. The firms have been issued warnings that the entire retail chain must reflect revised prices in order to avoid action under NAA; and the expectation is that there will be some exemplary action soon to make industry fall in line. The food joints, eateries and restaurant chains are also likely to face the heat for retaining price hikes; even though their tax rate has dropped, they no longer get any credits for taxes paid on inputs. Protecting consumer interest is important, but the prospect of the government monitoring prices and asking businesses to justify pricing decisions instead of letting market forces play out is unnerving. The NAA could take a cue from the Competition Commission of India in this regard and focus on firms raising prices indiscriminately in markets where they enjoy a dominant position or monopoly, or forming pricing cartels. The government must ensure that the authority's powers are used transparently and only where there is genuine consumer or public interest at stake. Otherwise, it runs the risk of making profit itself a bad word for the entire industry. 


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