Trade, Pass on GST Benefit to Consumer–Economic Times–17.11.2017

The Cabinet’s nod for setting up the National Anti-Profiteering Authority (NAA) provided for in the goods and services tax (GST) law is a testimony to the government’s determination that consumers should reap the full benefit of the reduction GST has brought about in the tax burden on goods and services. Activation of this provision in the law might have been avoided, had trade and industry passed on the eliminated cascading of taxes to consumers by way of lower prices.

Instead, in many instances, traders have jacked up prices, saying the GST rate is higher than the earlier rate of value added tax (VAT). Trade and industry would do well to take heed from the Cabinet decision and pass on the benefit of eliminated tax cascade and the lower rate structure for a great many goods recently decided on by the GST Council.

However, the pricing of products and services is a dynamic process, and depends on a host of factors including quality and brand premia. The NAA must tread cautiously in the terrain of pricing, when it examines “whether input tax credits availed by a registered person or the reduction in the tax rate have actually led to a commensurate reduction in the prices of goods or services or both supplied by him”.

The scrutiny should be done in a clear, fair and transparent way to eliminate any subjectivity. It should not place a needless compliance burden on manufacturers. Nor should it lead to fear-mongering, given that the authority will have sweeping powers that include imposing a penalty on the defaulting business entity or even order a cancellation of its registration under GST.

The NAA, as the final adjudicating authority, will be headed by a senior officer of the level of Secretary with four technical members. The need is to rope in professionals with domain expertise. The institutional framework that includes a Standing Committee, Screening Committees in every State and the Directorate General of Safeguards in the Central Board of Excise & Customs (CBEC) is complex. A simpler way would have been to let the Competition Commission of India (CCI) do the job.

This piece appeared as an editorial opinion in the print edition of The Economic Times.
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via Trade, Pass on GST Benefit to Consumer

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