GST: 'Draconian' anti-profiteering rules stipulate deregistration of offending companies

The government has put in place a few ‘draconian’ rules to force businesses to pass on the benefits of goods and services tax (GST) to consumers, even threatening with cancellation of registration in case found guilty of profiteering. According to media reports, the National Anti-Profiteering Authority – which is the apex body to check profiteering by companies, will have powers to impose penalty and even cancel the registration of companies. The rules, which were finalised by GST Council on Sunday, are not yet made public. According to a report in The Hindu, the authority will be headed by a retired  high court judge or somebody in the Indian Legal Service who has held the position of additional secretary or higher for three years. [caption id=“attachment_3524185” align=“alignleft” width=“380”]  Finance Minister Arun Jaitley. PTI[/caption] According to a report in The Times of India, the rules mandate a three-step procedure to determine an entity’s culpability. Any complaint will be first verified by a standing committee of officers. If there is merit in the case, it will be investigated by the director general of safeguards. Based on the report submitted, the authority will decide the quantum of punishment. The entire process will take eight months. Tax experts are not enthused with the rules as they feel they are too harsh on businesses and may even result in misuse by rivals. “The current mechanism is too broad-based and difficult to implement. Can you act against an eatery in Mahabalipuram that does not pass on the gains of input tax credit,” a tax practitioner from a global consultancy has been quoted as saying in the ToI report. Meanwhile, MS Mani, Senior Director, Deloitte Haskins & Sells LLP, Deloitte, has termed the rules that stipulate deregistration “draconian” and said it would be used only against repeat offenders. Earlier on Tuesday, finance minister Arun Jaitley said the anti-profiteering clause is transient and should act as a deterrent. “I hope we are not compelled to use it,” he said. He also said on Tuesday that the government will not blink on rolling out the GST from 1 July, emphasising that businesses cannot give any excuse for not being ready as enough time was given to them for preparation. However, implementation of the Goods and Services Tax ( GST), which will unify more than a dozen separate levies to create a single market, may result in “some disruption” and “technological glitches” initially as traders and the smallest of businesses will have to file returns online, he said.