Mock purchases, site visits and checking of invoices of the top 20 suppliers in their respective jurisdictions will be standard practice for GST officials.
This news followed another development. The tenure of the anti-profiteering watchdog – the National Anti-Profiteering Authority (NAA) was recently extended by two years, up to November 2021.
As of May 1, NAA has passed 65 orders involving an established profiteering amount of Rs. 600 odd crore. The official reason cited for extending the tenure of NAA is that 350 cases are still pending, which cannot be resolved by this November. The long arms of the NAA; it appears have spared no one. HUL and Patanjali have met the same fate of notices for anti-profiteering.
The FMCG sector appears to have borne the brunt of the NAA’s action. And as any company or distributor, worth their salt, or shall we say dath-manjan would say, the resultant pain is as severe as that of a toothache, if not more.
Well, this is certainly not what has happened.
Under the provisions of the GST laws a supplier of a good has to reduce the prices in a commensurate manner in two circumstances. When there is a reduction in the rate of tax on the good itself or a benefit of input tax credit is available.
The anti-profiteering clause makes it sound that it is easy to determine the benefits and thus pass them on. Shockingly, the term profiteering is not specifically defined, nor is there any methodology in place that can be uniformly followed by both taxmen and business to determine whether there has been any anti-profiteering. Also, we have witnessed a fall in the rupee value or rise in oil prices – both of which impact the cost of doing business. Should a business not factor in increased costs while determining its pricing?
GST rates have also not been static; changing the packaging itself to reflect new prices (or increasing the weight so as to pass on the benefits of the GST cut) is an additional cost and an administrative burden.
It is wide open for any person, including an interested party – say a rival company to file an anti-profiteering charge. This could and perhaps has rendered the clause subject to misuse.
Several companies are battling it out in court. A few have even got stay orders. Litigation is expensive and time-consuming, but at present, it seems the only recourse for India Inc.
Malaysia soon realized the perils of an all-encompassing anti-profiteering mechanism and subsequently restricted its application only over essential commodities.
‘In public interest’ the Indian government is having a say in the pricing of products by private entities. Surely, this cannot extend to any product?
Maybe the step taken by Malaysia is the best alternative. Any new case to be taken up by NAA, during the remaining period of its tenure must relate only to anti-profiteering for essential goods. Further, we need to ensure that NAA doesn’t become a permanent fixture on the GST landscape.
Source- Times of India.