Before get into the detailed functioning of NAA and how it’s protecting consumer’s interest, first let us understand background of it. In terms of Section 171 of the CGST Act, 2017, the suppliers of goods and services should pass on the benefit of any reduction in the rate of tax or the benefit of input tax credit to the recipients by way of commensurate reduction in prices. The wilful action of not passing on the above benefits to the recipients in the manner prescribed is known as “profiteering”. Anti-profiteering rules prevent entities from making excessive profits because of GST.
NAA (National Anti-Profiteering Authority) is required to determine whether the benefit of input tax credit or reduction in the tax rate has actually resulted in a commensurate reduction in the price of the goods or services or both. The NAA has the power to identify the registered person who has not passed on the benefit of reduction in tax rate or input tax credit by way of commensurate reduction in prices and it may order reduction in prices; return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest; cancellation of registration of the supplier and imposition of penalty. In case the eligible recipient is not identifiable or does not claim return of the amount, the NAA may order the supplier to deposit the amount in the Consumer Welfare Fund. To make sure interest of consumers was protected, anti-profiteering was built into the GST law. In simple words, it meant that if businesses failed to pass on higher availability of credit, and therefore lower input costs, to the ultimate consumer, they could face penal action. Mostly, this meant that GST benefits must result in a fair reduction of prices.
Sources: News Paper and Government website
Let us understand the anti profiteering with below example
The tax rate on meals in restaurants has approximately reduced to 18% from the initial 20.5% due to any other key changes in tax system. This means the food supplier should technically sell a Rs.100 worth food item for Rs.118 now and not Rs.120.5. As per the Anti Profiteering rules, this benefit of reduced tax rate should be passed on to the consumer in the form of reduced price. Not to forget the impact of reduced input costs, this must also be passed on to consumer. It means restaurants should be charged for that food item 118 rupees due to input tax reduction from 20.5% to 18% not at 120.5 rupees. If a restaurant sells at 120.5 rupees then consumer can the file case on restaurants through NAA
Note: Above Rates & percentages only example not standard numbers
HOW DO PEOPLE FEEL ABOUT THIS ACT?
As a known fact, India implemented anti profiteering rules seeing its effectiveness in other countries. A major class of people feels that if India too comes up with such well defined norms assess the benefit of GST which can be further passes on, the gain from GST could augur well for both consumer and business. Or else we run the risk of seeking multiple lawsuits on this matter.
MY TAKE ON THIS ACT./ LAW
As long as people don’t know the basic and standard tax structure of GST for any goods and services, business are definitely take the advantage of our Illiteracy on tax system and misuse the aim of GST i.e. protection of the consumer interest. Therefore people should up to date the current slab rates for anything that we buy in the market and also what is the complaint redressal mechanism available to the consumer if incase of businesses are fail to follow the GST tax structure and profiteering in the name of GST.
Yamala. NN. Ganesh Naidu
Independent Researcher –Economics