Goods and Services Tax (GST)

GST rate cut: Union Cabinet gives nod for body to guard against profiteering

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Note4Students

Mains Paper 3 | Indian Economy and issues relating to planning, mobilization of resources, growth

From UPSC perspective, the following things are important:

Prelims level: GST, GST Council, National Anti-Profiteering Authority, Anti-Profiteering Framework

Mains level: The news card talks about Union cabinet’s approval to set up National Anti-Profiteering Authority, the composition of the authority and various concerns related to it


News

Context

  • The Union Cabinet on approved the setting up of a National Anti-Profiteering Authority, a body with an overarching mandate to ensure that the reduction in tax rates under the new Goods and Services Tax (GST) regime gets passed on to consumers by way of lower prices

The Anti-Profiteering Framework

  • The anti-profiteering framework under the new indirect tax regime consists of the National Anti-Profiteering Authority at the top, a standing committee, screening committees in every state and Directorate General of Safeguards in the Central Board of Excise & Customs (CBEC).

National Anti-Profiteering Authority

  1. The authority will have the power to cancel registration of any entity or business if it fails to pass on the benefit of lower taxes under the GST regime to consumers and empowers consumers to approach it in case of any complaint
  2. It enables consumers to file complaints in case the benefits are not transferred to them
  3. Section 171 of the CGST Act, which pertains to anti-profiteering provides for the establishment of such a authority

Composition of the Authority

  1. It will be a five-member committee
  2. It will be headed by Cabinet Secretary and comprising Revenue Secretary, CBEC Chairman and chief secretaries from two states, has been entrusted to finalize the chairman and members of the authority
  3. The chairman and the four members have to be less than 62 years
  4. The authority will have a sunset date of two years from the date on which the chairman assumes charge

What actions can National Profiteering Authority take in case of Profiteering by Companies?

  1. If the authority finds that a company has not passed on the benefits, it can direct the entity to pass on the benefits to consumers along with interest at the rate of 18 percent from the date of collection of the higher amount till the date of return of such amount.
  2. If the beneficiary cannot be identified, the authority can ask the company to transfer the amount to the ‘Consumer Welfare Fund’, as provided under Section 57 of CGST Act.
  3. According to the anti-profiteering rules, the authority can also order imposition of penalty if the registered GST assessee has not passed on the benefit to the recipient.

What was the need for this Authority?

  1. The move comes in the backdrop of the GST Council’s announcement last week of a cut in the rates of over 200 items, as well as a cut in the GST rate for all restaurants, barring those in starred hotels, to 5 percent
  2. It was reported that as per the internal estimates, although the big restaurants were claiming about 6-7 percent of the GST rate as input tax credit (ITC) on overheads such as rent but they were not transferring the benefits to consumers by way of lower prices

Concerns

  1. Meanwhile, tax experts and industry have expressed concern about the methodology to be followed by the investigating authority to determine the quantum of the “commensurate” reduction
  2. From an industry perspective, there are lot of implementation challenges and operational issues as to how to pass on the benefit
  3. Also, industry expects detailed guidelines providing guidance on the same must be issued at the earliest by the GST Council
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