Anti-profiteering rules: Why it may prove draconian to debar traders in early days of GST

The anti-profiteering authority (APA) under the GST regime to be rolled out in less than ten days would be the most short-lived authority ever with tenure of just two years from the date of its constitution.  It would be the interim Pope, so to speak.  An interim Pope is however appointed pending appointment of a permanent Pope but APA it seems would have no successor much less a permanent appointee.

The stated objective of APA is to rein in the greed of traders who might dare not to pass on the supposedly lower taxes under the GST regime to the consumers with whom the buck stops. The APA has the authority to debar a defiant trader if he remains incorrigible and mend his ways.  But that is the ultimate weapon in its hands.  To be fair to the law-makers, the brahmastra would not be used unless the following measures are resorted to by APA in that order:

 Anti-profiteering rules: Why it may prove draconian to debar traders in early days of GST

Finance minister Arun Jaitley. PTI

a) Reduction in prices on being ordered to do so or voluntarily;

b) Returning the excess price back to customers on being ordered or in a manner of double-take;

c) Depositing the excess price in customer welfare fund where the fleeced customers are apathetic; and

d) Imposition of penalty equal to the excess billing.

APA doesn’t have a suo motu power in this regard.  Instead its powers are triggered off by a complaint by a customer done in by the trader avarice. Yet, it leaves enormous powers in the hands of the government of the day to set the wheels of retribution in motion against an industrial group not toeing its line. And if the government at the state where from the complaint originates and at the Center are of the same party, so much the ease of reprisal.

The moot question however is----how on earth would the APA come to the conclusion that the given trader or service provider is profiteering. Higher prices vis-à-vis competition may be on account of product differentiation i.e. a premium product.  And again, the more efficient user of resources can make more profits just as the one relying on own capital rather than on loan capital can. Would under the new regime cost plus pricing be mandatory?  Would everyone have to maintain elaborate cost records and show the markup to the cost?  Because otherwise how to prove one has profiteered?  Even a semblance of profit would give rise to the adverse presumption of profiteering.  That would make the APA the dreaded monster.

It is surprising that APA would be dismantled even while it is still in its infancy. In fact APA, if at all ought to have been ushered in after two years of GST law kicking in, in order to allow time to the trader to give up its perceived bad habits including greed.  It is strange that it would be there when it is not needed and not there when it would arguably perhaps be more needed. A class monitor minds the class till the teacher arrives. But APA, cast in the role of the class monitor, alas would have no teacher or disciplinarian following it. It is rather optimistic if not presumptuous on the part of the law-makers to assume good behavior all-round two years after the new law kicks in.

In any case Competition Commission of India (CCI) is there to rein in greed. Is it the government’s case that the CCI should be spared of the burden of disciplining cupid traders during the infancy of the law? What about the pending cases left behind by APA? Will they fall on the laps of CCI?

The power to debar a trader early in the early days of GST is indeed draconian despite the assurance of the Finance Minister Arun Jaitley that the brahmastra would be used sparingly.  But dangerous powers in the hands of authorities are always worrisome.

Updated Date: Jun 21, 2017 11:12:56 IST