National Anti-profiteering Authority (NAA)

On November 16, 2017, the Union Cabinet approved for the creation of posts of Chairman and Technical Members of the National Anti-profiteering Authority (NAA) under GST.

What is Profiteering?

Profiteering refers to making unfair profits by whatever means including unethical and illegal means such as manipulating prices during shortage, calamities, disasters etc. and due to loopholes in existing laws and policies of the government.

What is rationale behind NAA?

On 14 November, the GST rates were slashed from 28% to 18% on goods under 178 headings. After this, there are now only 50 items that attract the highest GST slab of 28%. Similarly, a large number of items were placed from 18% to 12% GST slab and some goods have been completely exempted from GST.

The GST law has provided for institutional mechanism for anti-profiteering to ensure that the full benefits of the input tax credits and reduced GST rates flow to the consumers. Thus, the rationale of creating a National level authority is to make sure that:

• Benefits of tax reduction by GST council precipitate to the customers and traders don’t make unfair profits from these reductions.
• The traders are not allowed to steeply increase the prices in case any GST rate is increased by GST council.

What is composition and structure of NAA?

The NAA is a five member body viz. one chairman and four technical members. The chairman, who heads NAA, is a senior officer of the level of secretary to the Government of India. There are four Technical Members from the Centre and/or the States. The authority will operate for two years. It would work on

Standing Committee on Anti-profiteering as well as State-level Screening Committees

How the NAA works?

As mentioned above, NAA will check any undue increase in prices of the products by companies / traders under GST and will act as a deterrent. It will work as follows:

• Any consumer / other person who feels that the benefit of the tax reduction is not being passed to consumers; he / she may apply for relief to the Screening Committee of the state. However, if the incident of profiteering has all India ramifications, the person can also directly apply to Standing Committee of NAA.
• The committee will make a prima facie view if there is an element of profiteering. It can decide the methods and procedure for determination as to whether reduction in taxes or benefit of input tax credit has been passed on to customers or not; and whether there are elements of profiteering.
• If the element of profiteering is found, the Standing Committee will refer the matter for detailed investigation to the Director General of Safeguards, CBEC – which shall report its findings to the NAA.
• Appropriate further actions will be taken by NAA. NAA will pass its orders within 2 months. An opportunity of hearing would also be granted to the interested parties.

What are key powers of NAA?

The authority has the power to make the company reduce its prices and refund the money to the consumer along with an interest of 18 per cent or deposit it in the Consumer Welfare Fund. It can also impose a penalty and cancel the registration of the company.