The National Anti-profiteering Authority (NAA) in the goods and services tax regime will have the powers to cancel the registration of a business if it is found guilty of not passing on the benefit of lower tax rates or input tax credit to the consumers. Additionally, it can recover the excess profits made by the firm with an interest of 18% and impose penalties on it, according to the relevant rules notified by the government on Tuesday.
The rules provide for a transitory anti-profiteering authority with a tenure of two years, which can be extended on the recommendations of the GST Council. The anti-profiteering provision has been widely criticised by industry for fear of possible harassment. However, in an effort to reassure businesses, finance minis- ter Arun Jaitley on Tuesday said it was meant to be just a deterrent and hoped that the government won’t be compelled to use it.
The proposed mechanism is meant to ensure that the benefits of tax rate cuts and input tax credit in the GST regime are fully transmitted to the recipients in B2B and B2C transactions
The anti-profiteering mechanism will consist of a four-tier administrative structure and definite timelines for disposing of applications. State-level screening committees will be the first to examine petitions against profiteering, followed by the standing committee at the federal level, which could refer the matter for investigation to the director general of safeguards (DGS). With the benefit of DGS inputs, a five-member NAA will order appropriate remedial action.
The chairman of the NAA will be a serving or retired secretary-level official while the other members could be serving or retired official who have served as com- missioners in state or Centre tax regimes. In short, all are existing or former government officers.
The GST Council will form the standing committee which will have officers from both the Centre and state governments. Additionally, each state will have a screening committee that will be vested with the mandate of first vetting local complaints of profiteering.
The screening committees will first receive complaints and establish, prima facie, that a entity has indeed not passed on the benefit of reduced tax incidence or input tax credit on supply of goods or services to the consumers.
This complaint will then be forwarded to the standing committee with recommendation. The standing committee, in turn, will vet the evidence in a maximum of two months and pass the matter to the DGS for detailed investigation if it is satisfied with preliminary evidence of profiteering.
The DGS will have three months to complete the investigation and submit a report to the authority. It will also have the authority to summon persons and related documents and records from the supplier under investigation.
After the receipt of the report from the DGS, the authority will have three months to pass an order, and allow interested parties an opportunity to present their cases. If the authority finds a supplier guilty of profiteering, it can pass an order to either reduce prices or recover an amount equivalent to that made through profiteering with an interest rate of 18%.
The recovered amount will be refunded to identifiable consumers but in case such consumers can’t be indemnified, the recovered amount will be deposited in the Consumer Welfare Fund as envisaged in the GST Act. As per the rules, the NAA is not empowered to act on its own.
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“The authority will determine the methodology and procedure for determination as to whether the reduction in rate of tax on the supply of goods or services or the benefit of input tax credit has been passed on by the registered person to the recipient by way of commensurate reduction in prices,” Tuesday’s notification said.