The recent Cabinet decision to set up a National Anti-profiteering Authority (NAA) and the message given to industry by policymakers that the benefits of the goods and services tax (GST) in the form of lower tax rates and higher input tax credits must reach the final consumers may have created the impression that consumers have inundated the respective authorities with pleas to crack down on non-compliant businesses.
The recent Cabinet decision to set up a National Anti-profiteering Authority (NAA) and the message given to industry by policymakers that the benefits of the goods and services tax (GST) in the form of lower tax rates and higher input tax credits must reach the final consumers may have created the impression that consumers have inundated the respective authorities with pleas to crack down on non-compliant businesses. Far from it. FE spoke to eight state tax departments on how busy their anti-profiteering machinery has been, and it is clear that except in some states like Kerala, the number of serious actionable complaints have been few and far between.
Several states like Tamil Nadu and Gujarat are yet to receive any complaint against profiteering, even though the GST Council had in its latest meeting held at Guwahati cut the tax rates on over 200 items, including a large number of fast-moving consumer goods, and reduced the tax liability of restaurants, especially the relatively smaller ones. While the GST rate for restaurants except those at five-star hotels was cut to 5% (sans input tax credit or ITC) from 12% (non-AC) and 18% (AC) earlier, the industry is divided on whether this will reduce its tax liability. While the larger eateries that pay high rentals say the removal of ITC would pinch them, smaller outlets see scope for some price cuts.
Even Maharashtra, the most industrialised state in the country, has received only a few complaints against eateries while none of the petitions filed with the state’s tax department had a prima facie pan-India import and needed to be transferred to the standing committee at the central level. “We have received two to three complaints against restaurants in the last 10 days, after which we have deployed inspectors to verify these claims,” an official at Maharashtra’s anti-profiteering screening committee said on condition of anonymity.
The official added that the complaints were against small eateries and not against those with multiple outlets in various cities. The relatively lukewarm response of the consumers to the new mechanism that is still evolving is despite the recent missives sent by the Central Board of Excise and Customs to all major FMCG companies, asking them to immediately revise the maximum retail prices of products for which the tax cuts had been effected. “Although we haven’t received any complaints, we are working on a pre-emptive mechanism to deal with profiteering,” a Gujarat tax official told FE. He declined to disclose the mechanism, saying he wasn’t authorised to discuss it.
Andhra Pradesh has received just one complaint which would soon be taken up by the screening committee, an official said, but didn’t disclose the details of the petition. The screening committees in eastern states of Bihar and Jharkhand too haven’t received any petition of substantial nature. A Jharkhand official said that while many GST-related complaints have been received by the tax department, none of these are related to profiteering. “We have received complaints against some businesses which are supposedly required to register under GST but haven’t done so yet,” the official said. Although Bihar has received petitions against profiteering, they are either one-line complaints, drafted poorly with little evidence, or do not stand prima facie scrutiny. “One of the complaints we have received says that milk prices haven’t gone down but this did not stand scrutiny as milk was not taxed before or after GST roll-out,” said a Bihar tax official.
The NAA will have the authority to order the supplier/business concerned to reduce its prices or return the undue benefit availed by it along with interest to the recipient of the goods or services. If the undue benefit cannot be passed on to the recipient, it can be ordered to be deposited in the Consumer Welfare Fund. The NAA can impose a penalty on the defaulting business entity and even order the cancellation of its registration under GST.