NAA plans to knock on factory gates to enforce GST rate cuts

New Delhi: The National Anti-profiteering Authority (NAA) has moved to make sure that cuts in goods and services tax (GST) rates are enforced at the factory gate level rather than waiting for consumers to complain about businesses cornering tax benefits meant for them.

Manufacturers and wholesale dealers will now get calls from GST officials asking them to lower prices in line with tax cuts at the beginning of the supply chain so that the benefits naturally follow to consumers. NAA is also in the process of putting in place a facility for anyone to dial a number and file complaints under guidance from a tax inspector, said a person familiar with the development.

This comes in the wake of NAA noting that there has not been a single complaint of profiteering from 17 states, including Gujarat, Madhya Pradesh, Bihar, Punjab, Chhattisgarh, Tamil Nadu, Odisha, Goa, Jammu & Kashmir and Puducherry despite several rounds of tax cuts since the GST rollout in July 2017.

Gujarat, Maharashtra and Punjab are among the largest recipients of compensation from the central government for their GST revenue shortfall from projected levels.

The sacrifice of tax revenue loses its purpose when the benefit does not reach the consumer, said the person quoted above.

In July, Union minister Arun Jaitley said in a Facebook post that the loss to the exchequer from tax rate cuts on 384 commodities and 68 services since the GST rollout in 2017 was ₹ 70,000 crore. On 21 July, the GST Council slashed tax rates on several commodities, including refrigerators, television sets and air conditioners, from 28% to 18%.

NAA has alerted the Central Board of Indirect Taxes and Customs about the need for field officers to be vigilant about instances of businesses failing to pass on benefits of tax cuts to consumers. It is also in touch with the federal indirect tax body, the council, in this regard.

“Field officers have to have their antennas open all the time,” said the person quoted above.

NAA has partnered with the department of consumer affairs’ online customer engagement platform ‘LocalCircle’ through which customers can raise issues and file complaints. Experts said NAA’s latest approach of enforcing the effect of tax cuts on prices at the business-to-business level itself will have a positive effect. “Consumers stand to benefit from NAA’s initiative of reaching out to businesses at an early stage in the supply chain to ensure tax benefits are passed on. However, it is desirable that its implementation on the ground does not result in inspector raj,“ said Abhishek Jain, tax partner, EY.