Given how e-commerce platforms like Flipkart and Amazon are, at the end of the day, just marketplaces where various sellers make deliveries to buyers, it was always odd that the National Anti-Profiteering Authority was investigating a complaint against Flipkart for not passing on GST rate-cut benefits. In this particular case, a customer had placed an order for a Godrej almirah, and made a payment. Between the time the almirah was delivered to him, however, the GST rate was lowered to 18% and, in fact, at the time of delivery, Godrej had issued a fresh invoice showing a charge of Rs 700 less; this, the customer said, was Flipkart’s profiteering. While this amount was refunded to the customer, the Director General Anti-Profiteering (DGAP) examined the case in detail, and found that Godrej was offering a Rs 500 discount earlier, but had withdrawn this when the GST rates fell; the DGAP concluded that withdrawing of a discount was permissible and was not a case of profiteering by changing the base price when the GST rate was lowered. In the course of the investigation, Flipkart told the anti-profiteering authority that there were 7,254 cases where the orders were placed before the rate cut and and for which delivery was made after it. While the anti-profiteering authority has declared “it is also apparent that the respondent (Flipkart) was not the supplier/manufacturer of the almirah and was only an agent who had offered his platform to the supplier …. and was also not responsible for collection or refund of GST and hence he cannot be held accountable for contravention”, it has still asked the Director General of Audit of the Central Board of Indirect Taxes and Customs to audit major e-platforms.
The Anti-Profiteering Authority is investigating 50+ complaints, including one against McDonald’s for not cutting the price of its McCafe Regular Latte, and has delivered four verdicts so far. Each one has cleared the accused of charges of price gouging, but imagine the havoc this has created. The case of an almirah was relatively simple since Flipkart was just the sale point, but imagine the details that a McDonald’s has to submit, of the amount of milk and sugar, etc, in each Latte. In no product are prices fixed in the simplistic manner that the government imagines. If a company offers discounted prices to drive up sales, it may choose to lower the discount once GST rates fall, since the rate cut will mean demand will rise anyway; is this to be considered profiteering? Or, as the GST rate falls, some input prices may rise—imagine having to prove all of this to anti-profiteering authorities. Surely, at some point, the government has to start trusting markets to deliver, to ensure that in a competitive market-place, no firm is going to try and pocket the reduction in GST rates—if it did, it will simply lose customers. Indeed, given how a McDonald’s India strategy is to cut prices by as much as possible, does the government believe it is going to try and retain GST rate-cuts? Similarly, when e-tailers are competing ferociously to lower prices, will they take a chance on losing customers by not passing on rate cuts? Ideally, the anti-profiteering authority should be shut down, but if this is not possible, as this newspaper has argued, some ground rules need to be put in place—one such, for example, would be that no complaints will be investigated in markets where there are more than 3-4 players.