National Anti Profiteering Authority’s Term Extended by 2 Years

Source: Business Line

Fears that the GST would disturb India’s litigation problem seem to be coming true as far as anti-profiteering is concerned. Recently, the GST Council extended the tenure of the National Anti-Profiteering Authority (NAA) by two years. On considering the number of pending cases and increasing tussle between NAA and numerous companies, this decision was largely anticipated.

A slew of firms has been accused of failing to pass on the rate-reduction benefits commensurately to the last consumers. These include blue-chips like Hindustan Unilever Ltd, and Procter and Gamble India. But as witnessed in the past with GST, while the intent is good, implementation of concerning rules has been messy. Tax experts point out that only an extension of NAA’s term, without adequate guidelines, doesn’t cover many purposes. What we need actually is a proper framework to estimate the profiteering amount so that litigation can be avoided.

Businesses have been looking forward to clarifications on the practice of calculating the profiteering benefits to be passed on, and also on the duration of the anti-profiteering clause, including the sunset of this clause. There are several factors that dictate movement in prices including the cost of raw materials and the competition level. Without accounting for the impact of other factors companies may face difficulties to cut prices on the basis of GST rate cut alone. Also, one cannot ignore the amount of time and money companies may have to liquidate to deal with cases of price investigations, which are complicated especially for service providers. Hence, some tax experts are of the view that there should be a specific duration for this clause.

In conclusion, as far as fine-tuning of anti-profiteering rules are concerned, there is long a way to cover. But at a time when GST revenues continue to fall short of expectations, user-friendly laws would not only lower litigation but also boost-up compliance and aid revenue collections.