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The National Anti-Profiteering Authority (NAA) is the statutory mechanism under GST Acts to check the unfair profiteering activities by the registered suppliers. The Authority’s core function is to ensure that the commensurate benefits of the reduction in GST rates on goods and services done and that benefits accrued on account of of the Input tax credit (ITC) are passed on to the recipients by way of proportionate reduction in the prices by the suppliers.

In fact, the formation of NAA came in the background of rate-reduction of large number of items during 22nd & 23rd GST Council meeting at New Delhi & Guwahati respectively. At the meetings, the Council reduced rates of more than 200 items including goods and services. This has made tremendous price reduction effect and the consumers will be benefited only if the registered suppliers under GST Acts are reducing the prices of respective items immediately.

The Authority’s main function is to ensure that the registered suppliers under GST laws are not profiteering by charging higher prices from recipients in the name of GST. The legal mandate of the NAA is to examine and check such profiteering activities while recommending punitive actions including the cancellation of Registration. As the scheme of things stands now, the chairman, NAA along with 4 Technical members and with help of the Standing Committee, Screening Committee in every State and the Directorate General of Anti-Profiteering in the Central Board of Indirect taxes & Customs (CBIC), work together on the anti-profiteering front.

Well!!!, it has been the experience of many countries that when GST was introduced, there has been a marked increase in inflation and the prices of commodities. This happened despite the availability of the tax credit right from the production stage to the final consumption stage, across the supply chain, which should have reduced the final prices. But, the raise in prices was happening because the suppliers were not passing on the commensurate benefits to the consumer and thereby indulging in illegal profiteering. National Anti-profiteering Authority (NAA) was therefore constituted by the Central Government to examine whether additional input tax credits availed by any registered person or the reduction in the tax rate have resulted in a commensurate reduction in prices in the hands of the recipients, who ultimately bear the Tax incidence. The Authority’s core function obviously is to ensure that the benefits of reduction in GST rates on goods and services and of the input tax credit are passed on to consumers by way of reduction in prices.

Legislatively, in terms of Section 171 of the CGST ACT 2017,

Any reduction in the rate of tax on any supply of goods or services or the benefit of the input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.

The Sun sets for National Anti-Profiteering Authority - A logical End

The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

The Procedures, functions, set up and tenure of the National Anti-Profiteering Authority has been dealt with under Rule 128 to 137 of the CGST Rules 2017.

Looking back, the NAA was set up on 30th November 2017 under Section 171 of the CGST Act 2017 to check unfair profiteering activities by registered suppliers. Initially, it was set up for a period of two years till 30th November 2019 but was later extended by another period of two years till 30th November 2021. To continue the benefits and to achieve the objectives of the Anti-Profiteering Authority, the 45th GST Council meeting, at Lucknow on 17th September 2021, gave its recommendation for another one-year extension till November 30, 2022, to NAA and decided to thereafter shift the work responsibilities to Competition Commission of India (CCI). So, to put it in a nutshell, all Goods & Services Tax (GST) anti-profiteering complaints would be dealt with by the Competition Commission of India (CCI) from December 1, 2022, as the extended tenure of National Anti-profiteering Authority (NAA) ceases with effect from 30th November 2022. A formal notification in this regard is expected to be issued by the Finance Ministry during November 2022.

For the sake of familiarity, the Competition Commission of India (CCI) was established in March 2009 by the Government of India under the Competition Act, 2002. The Competition Commission is empowered by the Competition Act, 2002 to investigate, control, and evaluate restrictive business practices, abuse of dominant positions, and mergers in order to achieve equity and efficiency in trade and economy. It is the duty of the Commission to eliminate practices having an adverse effects on competition, promote and sustain competition, protect the interests of consumers, and ensure freedom of trade in the markets of India.

Now, therefore, as per the decision by the Council, taken during the 45th Meeting, henceforth, all investigations, based on complaints filed by consumers, on profiteering matters, will be done by the Directorate General of Anti-profiteering (DGAP), which will then submit an investigation report to CCI. The Competition Commission of India will establish a separate wing to handle complaints relating to GST profiteering.  As per the existing GST laws, a three-tier structure was put in place for the investigation and adjudication of the profiteering complaints.

The complaints are required to be first sent to State-level screening and standing committees, which are then forwarded on merits to DGAP for investigation.  The investigation report is then submitted by DGAP to NAA. The authority thereafter passes an order after hearing both parties ensuring the principles of Natural justice. If NAA finds that a supplier has indulged in profiteering, it must return the profiteered amount, along with 18%, to the consumer. If all the consumers cannot be identified, then the amount is transferred to the consumer welfare fund.

So, what if, National Anti-profiteering Authority (NAA) is set to be subsumed into the regulatory ecosystem of the Competition Commission of India (CCI). It is proposed that the NAA’s regulatory functions and its investigative arm i.e., the Director General of Anti-Profiteering would continue to operate in some form under the CCI. Obviously, this move is with the empirical propose to reduce the multiplicity of regulators. In fact, a standalone NAA may not be required, especially, after the passage of more than five years since the introduction of GST, when there exists a statutory body in the name of the CCI, having specialized legal and economic expertise on the subject matters of Restrictive Trade practices. On the face of it, the proposed merger of the two regulatory bodies seem to be a logical conclusion, given the perceived commonality of objectives between the two i.e., NAA & CCI – namely, regulation of economic laws and protection of consumer interests, though it is unclear to comprehend at the far end, as to how this will address the fundamental issues with the NAA and the institutional framework has been perceived under the Central Goods and Services Tax Act, 2017 (CGST Act) exclusively,  conjointly with CCI.

While be it, as it may, there is also apprehension on the flip side, in the minds of the consumers as to how the NAA and the CCI who have very different legislative frameworks under their respective statutes can merge in their functions in practice. The NAA was established as a statutory body under Section 171 of the CGST Act 2017 to track and curb any unfair profiteering by GST-registered sellers and facilitate the smooth passing on of any GST rate reductions to consumers. The NAA may, amongst other things, impose a penalty on persons for not passing on the benefit of tax reductions or input tax credits, by way of reduction in prices. There is no provision for a statutory appeal against an order of the NAA. Unsurprisingly, a plethora of writ petitions has been filed challenging the constitutionality of the said body per-se and its methodology (or lack thereof) for making the relevant calculations while the matter is currently sub-judice before the honorable Delhi High Court.

The CCI, on the other hand, is a statutory body established under Section 7 of the Competition Act, 2002, with the objective of preventing practices from having an adverse effect on competition, promoting and sustaining competition in the markets, to protect the interests of consumers and to ensure freedom of trade. The CCI also has the power to impose hefty penalties (such as the one of  Rs 6,700 crores penalty it imposed upon cement companies and the Cement Manufacturers Association for “cartelization” as early as in 2016). The CCI is, however, not a price regulator and is rarely concerned with exploitative prices charged by a party. The Competition Act 2002, also clearly sets out the appellate mechanism & appeals against the CCI’s orders lie before the National Company Law Appellate Tribunal and, thereafter, before the honorable Supreme Court.

With the advent of Digital work lifestyle and Culture in society, the CCI has gained prominence as a competition regulator, with the constitutional courts largely upholding its procedural and substantive actions. The honorable Supreme Court recently dismissed a writ petition filed by Meta-the Technology Company of “Facebook”, “Instagram” & “WhatsApp” challenging the CCI’s decision to investigate the 2021 Privacy Policy of WhatsApp, and also dismissed the pleas filed by Amazon and Flipkart against the CCI’s decision to investigate the e-commerce marketplaces. Earlier, the honorable Delhi High Court also had upheld the constitutional validity of the CCI and its practices in a challenge by several automakers. Adding to that, recently, the Parliamentary Standing Committee on Commerce’s Report on ‘Promotion and Regulation of E-Commerce in India’ recommended entrusting the CCI with major responsibilities of regulating e-commerce transactions in India, by setting up a digital markets division within the CCI and the introduction of ex-ante regulation of digital platforms. These decisions of the Honorable Courts have upscaled the importance and workload of CCI.

In this context, the proposed merger would, therefore, though would additionally burden the CCI with the interpretation of a new statute and related concerns, on contrast, this will also progressively lead to harmony in decisions without conflict of interest leading to litigations. While the objectives of both bodies are mutual to a larger extent, a merger of the NAA with CCI may have the intended consequence of halting the inconsistent rulings faced with new age issues including the rapidly evolving digital markets. The foundational issues of the NAA, such as introducing a mechanism or guidelines to undertake the necessary calculations and establishing a statutory appellate authority, will also be addressed consequently when the steps are undertaken to merge the bodies. Currently, the proposed merger requires the approval and recommendations of the GST Council and it is hoped that a more effective solution is contemplated by the Government which ensures that both statutes are effectively amalgamated and implemented with an eye on healthy competitive trade and business without profiteering.

Yes!! the Sun is to set for NAA and we have to wait and see if it has reached a logical end because Profits in business are moral while Profiteering is intolerable.

Jai Hind!!!!!


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One Comment


    CBIC issued notifications to empower the Competition Commission of India to handle anti-profiteering cases under CGST Act, 2017 with effect from 01.12.2022*

    *Notification No. 23/2022-Central Tax*

    From *01st December 2022, Competition Commission of India* is empowered to handle anti-profiteering cases under CGST

    *Notification No. 24/2022–Central Tax*

    Corresponding *changes have been made* in the CGST Rules 2017 (Rules 122 to 137) *to omit rules* of constitution, terms of services of chairman and member etc related to the *National Anti-profiteering Authority.*(NAA)

    The authority for anti profiteering is the *Competition Commission of India (CCI)*

    In simple words, from 01 December 2022, CCI shall examine whether *ITC availed* by any registered person or the *reduction in the tax rate* have actually *resulted in a commensurate reduction in the price* of the goods or services or both supplied by him.

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April 2024