Has National Anti-profiteering Authority outlived its utility?

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New Delhi | Updated: August 5, 2019 7:04:33 AM

It may be noted that since the GST’s July 2017 launch, tax rates on as many as 380 items were cut, in what could have given firms and dealers opportunity not to pass on the benefits to the consumers.

National Anti-profiteering Authority, NAA, GST rates,Goods and Services Tax, directorate general of anti-profiteeringThe requirement in law that makes it mandatory for the complainant to attend hearings in Delhi has dissuaded complainants form distant areas,” a source said.

Precious little — that’s how one could describe the outcome of the National Anti-profiteering Authority (NAA) and the two layers of panels below it since they were established in November 2017. Yet, the government thought it worthwhile to extend the life of the mechanism, the stated purpose of which is to ensure consumers indeed benefit from the Goods and Services Tax’s presumed mildness, by another two years to November, 2021.

The NAA has issued about 75 orders till date, detecting profiteering to the tune of `600 crore and collected almost zilch. For context, that was a negligible 0.00023% of total GST revenue reported so far.

Government sources on condition of anonymity told FE said that the NAA was grossly under-performing primarily due to the ‘centralisation’ of the processes. It had ended up becoming a sinecure for officials, they added.
Further, since the Authority has delivered nearly 25 orders after the mandatory period of three months it needs to deliver after a compliant has been lodged before it, these could potentially be invalidated by courts if challenged on this ground.

Even as there are 1.23 crore registered GST taxpayers, the investigative arm of NAA, namely the directorate general of anti-profiteering (DG-AP) has received only 193 complaints so far from the standing committee, which is manned by tax officials from state and the Centre. The standing committee receives complaints from state-level screening committees which handle profiteering complaints restricted within their respective states.
“Nearly half the states have not forwarded any complaints so far while more than 50% of the complains have come from in and around Delhi.

The requirement in law that makes it mandatory for the complainant to attend hearings in Delhi has dissuaded complainants form distant areas,” a source said.

Another person in the know said that in at least half a dozen cases where profiteering has been established, the amount involved is less than `20,000. He added that it was ‘criminal waste of resources’ for a body headed by an ex-officio secretary to the government of India to hear such trivial complaints.

It may be noted that since the GST’s July 2017 launch, tax rates on as many as 380 items were cut, in what could have given firms and dealers opportunity not to pass on the benefits to the consumers. However, the very low number of complaints and the minuscule amounts found to be raked in by the industry through overcharging show that the tendency to profiteer is very feeble.

“When junior officials in the field formations deal with tax evasion cases that encompass various laws and involve complex investigations, it would have been logical to entrust them with profiteering complains, which are relatively straight forward,” the second person added. This would have also provided consumers access to the grievance redressal mechanism away from major cities. While NAA was established as a transitory for two years with a promise that it would be non-intrusive in nature, the GST Council in June extended its tenure to November, 2021.

Further, the government also extended the tenure of NAA’s current chairman by two years. Many NAA orders against large companies – Hardcastle, Hindustan Unilever and Reckitt Benckiser among others – have been stayed by the High Courts.

In some cases, Courts have questioned the constitutional validity of anti-profiteering law while in others lack of methodology to calculate profiteering has been questioned while granting a stay to the petitioners. “In most of the petitions, the quantum of profiteering has been the subject matter of dispute based on different factors and parameters and absence of guidelines for computation. As a corollary, the Courts have followed a balanced approach based on merits”, said Abhishek A Rastogi, partner at Khaitan & Co, who is arguing multiple petitions on profiteering.

The Courts have also questioned NAA orders where it has asked the DG-AP to expand its probe to items not included in the original complaint. Further, petitioners have also raised the issue of of time limitation on some orders. “The period prescribed in law will certainly be looked into by the courts while determining different aspects as to the legality and constitutionality of the anti-profiteering provisions”, Rastogi said. He added NAA can’t delay its order indefinitely – it has to deliver within three months once DG-AP submits the report, with a possible extension by another three months.

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