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National Anti-Profiteering Authority

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November 21, 2017

What is the issue?

  • National Anti-profiteering Authority (NAA), as part of the GST Act was approved by the Cabinet recently.
  • It is empowered to crack down on firms that fail to pass on the ‘benefits’ of the tax regime to consumers.
  • The fear of NAA becoming a tool of harassment looms large among businesses.

What are the powers of NAA?

  • The authority can order businesses to reduce product prices or refund the undue benefits earned back to customer.
  • In extreme cases it can even impose a penalty on errant firms and cancel their registration with GST.
  • If the consumers are difficult to trace, then the money attained from undue benefits will be deposited in a consumer welfare fund.
  • The authority will have its own bureaucracy and a screening committee in each State that consumers can lodge complains with.
  • It will also have an investigating wing and a standing committee to take up profiteering allegations with a pan-Indian impact.

What are the challenges?

  • Establishing Guilt - Clarity on how the difference between undue profit and fair play will be ascertained is missing.
  • This discretionary space available to the NAA could be misused or wrongly used by the authority.
  • Irrationality - Companies have been urged to ensure that new MRPs are inscribed even on products that have already reached markets.
  • While wholesalers can still implement this, reaching every last retailer is a challenge.
  • But firms have been warned that the entire retail chain must reflect revised prices in order to avoid anti-profiteering action.
  • The expectation is that there will be some exemplary action soon to make industry fall in line.

What is the way forward?

  • While protecting consumer interest is important, the prospect of the government monitoring prices is not desirable.
  • Asking businesses to justify pricing decisions instead of letting market forces play out is uncomforting.
  • The NAA could rather partner with the Competition Commission of India and focus on select firms raising prices indiscriminately.
  • This usually happens only in markets where some businesses enjoy a dominant position, or where pricing cartels are formed.
  • Hence, the authority’s should use its powers transparently and only where there is genuine consumer/public interest at stake.

 

Source: The Hindu

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