Despite slashed GST, without proper checks and balances, consumers stand to lose

Once constituted, National Anti-profiteering Authority (NAA) will have to begin its work in earnest to check huge profiteering resorted to by several unscrupulous providers of goods and services under the GST regime. Profiteering seems to have heightened especially after the November 15 decision of Union Cabinet that had slashed GST rates of over 200 items after the unified tax impost was rolled out on July 1.

In several instances, the retailers and companies themselves have pushed up the prices of their products to keep the maximum retail price (MRP) at the pre-November 15 level and profiteer big time. Even organised retailers like Big Bazaar or Reliance Retail have not passed on till Saturday the benefit of lower tax incidence to customers. In fact, worst fears of retailers and companies making a killing in the transition may come true. Profiteering is bound to happen at least till the dust settles down in several ways. One, these companies would take input tax credit for several products at 12 – 28 per cent. Secondly, having not passed on the benefit through higher prices, hefty margins are booked against current sales. Especially on goods already stocked and fresh arrivals as well, most retail outlets continued to charge as per their whims and fancy given that taxation officials have virtually disappeared from the market.

It’s not just the kirana shop owners who have anyway been grappling with GST, organised retail chains have more wherewithal to fleece their unsuspecting customers. Till Sunday, not many restaurants across the national capital region slashed the GST to 5 per cent on food bills. They continued to charge 12–18 per cent.

The merchandisers and service providers have already begun citing flimsy reasons for not recalibrate their systems. Unfortunately, corporate, marketing and retail networks miss the big picture. Lower taxation was aimed at pushing up demand for goods and services, enhance volumes sale and thus prevent the economy from losing steam.

Finance secretary Hashmukh Adia had talked about NAA not being a tool in the hands of taxation officials to harass the small and medium enterprises switching over to GST. An institutional mechanism with checks and balances will have to be put in place if NAA were not to turn into another demonic organisation. Given that our income tax, customs and excise officials’ track records, abundant caution has to be exercised to prevent them using the loopholes to their benefit. This could in fact be counter-productive and yet another form of corruptive and coercive regime could be given birth to.

The proposed Directorate General of Safeguards (DGS) that would investigate into violations will have the powers to force the companies and services providers to pass on the lower tax benefits to consumers prospectively. Secondly, the DGS would compute the undue profits made in the past with 18 per cent interest on tax benefits not passed on by the irresponsible corporate players. Penalties and penal provisions may also be invoked to bring the frauds to book. But, here’s the catch. What’s the guarantee that DGS will not play foul to make its own cut? How does one balance out while protecting the interests of consumers on one side and corporate players not being subjected to undue harassment?

One way of doing it perhaps was to allow consumers approach the consumer tribunals or hold open houses across the country to provide reprieve as in any other violation. Second way was to make the NAA–DGS procedures transparent, open and simple, weeding out the corrupt taxation bureaucracy. Hence, setting up of NAA and DGS becomes the key in early days of GST.