Anti-profiteering body is redundant–Economic Times–14.06.2018

The National Anti-Profiteering Authority has not done anything much to earn the fear and loathing that industry had reserved for it, when it was set up, with the goal of ensuring that industry passed on to consumers the lower incidence of tax on their produce arising from the old indirect tax regime giving way to the goods and services tax (GST). Its decisions on complaints against companies have been rational, by and large. But that still does not mean that this is an agency with continued justification for its existence. Its very presence is inimical to ease of doing business and a potential source of arbitrariness and harassment of companies. It is best to rely on the competitive strength of the economy to let product prices find the levels that consumers and producers find acceptable, and on the institution of the Competition Commission of India to ensure that market power is not abused to distort competition.

There are many things that are inherently vague about the business of determining profiteering. The authority has to ensure that companies pass on commensurate benefit to consumers when tax rates are lowered. What is commensurate will vary, depending on the kind of product and its positioning in the range from mass-market to super-premium. How is the authority to decide what is commensurate? At what level of disaggregation should the price changes be effected and notified? What is the sense in asking the FMCG sector to bear the cost of reprinting product packaging to reflect new tax rates and prices? How long should be the timeframe for determining benefit transfer? What about other costs, such as the cost of transportation that can be volatile at a time of volatile crude prices, whose effect will mask that of the tax change?

The potential for arbitrariness is beyond the best intentions of the authority. It would be best to let competition set pricing, as in the pre-GST regime. In any case, GST rates should stabilise and not yo-yo as pre-GST rates tended to, in some states. The transitional authority should go with the transition.

This piece appeared as an editorial opinion in the print edition of The Economic Times.
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