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Monday, 16 October 2017 04:16
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Drop GST's anti-profiteering body, it will just harass businesses

Revenue secretary Hasmukh Adhia, in an interview to this newspaper, has suggested the government may not, in fact, end up using the anti-profiteering authority that was an integral part of the GST architecture. Though the GST Council has cleared the setting up of the authority, the Cabinet is yet to approve this—only once this is done can the authority be set up and start operations. As Adhia has said, the government has not got any major complaints on profiteering by firms—in the sense of not passing on the benefits of GST rates being lower than what they were paying before the new system came into place. The complaints got, he said, were about a few restaurants and real estate and were local in nature, not even national. While a very small number of complaints is natural right now, given the way the GST was designed, the rates were fixed in such a manner that they were more or less the same as those being paid pre-GST.

What is important, however, is that the government realise the reason why the authority is not needed is that, with so much competition, in almost every segment of the market, there is no question of taxation cuts not being passed on. So, if the GST rate comes down to 18% as compared to, say, 30% paid pre-GST, and this is not passed on, the firms stand to lose their business. But it is possible that the rates may not be passed on, either partially or in full, for several other reasons—either other input prices may have gone up or because, after having absorbed cost increases in the past, businesses feel they can finally pass them on to consumers. This is why the anti-profiteering authority simply has to be done away with once and for all—since government inspectors cannot possibly determine whether a price cut is warranted or not, all that this will do is to open up businesses to harassment and, as a result, make the system more prone to corruption. And, in any case, if the government finds very serious cases of what it thinks is price-gouging as a result of cartelisation—there can be no other reason—it can always refer the matter to the Competition Commission; it doesn’t need to have an anti-profiteering authority to do this. At a time when there is enough evidence the government’s faith in markets is low—witness the increasing price controls in the pharmaceuticals/medical devices market and the frequent imposition of stocking limits whenever agriculture prices rise—formally scrapping the anti-profiteering authority would signal a major change in the way the government views businesses and markets.

 

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