WILL “NATIONAL ANTI-PROFITEERING AUTHORITY” SURVIVE IN GST?

Most of us are aware about National Anti-profiteering Authority (“Authority”) under GST but the question is why there is need for this Authority?

Its main function is to see whether the benefits of reduction in rates reach to final consumers. It means whenever there is a reduction in rates of Taxes of any commodity/service under GST, the supplier has to reduce the prices of the commodity/service and as a result, thereof their profit remains the same.

But the point is in the era of cut-throat competition; price reduction can be automatically decided or determined by the market forces, then why there is need of this new Authority in GST regime. The question as to reduce price or not is more related to the commercial decision of Suppliers.

Let me tell you there is already an authority which is Competition Commission of India (“CCI”) which ensure the healthy competition and curb the malpractice such as cartelization, abuse of dominant position or any activity which disturb the market.

Therefore, we can safely say that even if some suppliers form cartel and raise the price above the competitive level, still the CCI can take care of such anti-competitive activities.

Constitutional Validity of Anti-Profiteering Authority in GST

The points discussed above define rationality of the Authority on the basis of its functions. But if we see its provision which is codified in section 171 under CGST Act, 2017, then we shall find that it does not follow the basic feature of the Constitution which enshrined the “separation of power among Judiciary, Legislature, and Executive.”

Separation of power under constitution means that the law has to be made by the Legislature and implemented by the bureaucrats (Executive Body). But section 171 (enacted by the legislature) is not the very detailed one rather it only suggests that suppliers will pass on the benefit of commensurate reduction in rate. Questions like what will be the penalty, what profiteering actually means, guiding principle, nothing has been touched by draftsmen.

As per Rule 123(1) of CGST Rules, the council may constitute a standing committee on Anti-profiteering which shall consist of such officers of the State Government (“SG”) and Central Government (“CG”) as may be nominated by it. Further, in terms of Rule 123(2) a state level Screening Committee shall be constituted in each State by the SG which shall consist of:

1. One officer of the SG, to be nominated by the Commissioner, and

2. One officer of the CG, to be nominated by the Chief Commissioner.

Further, the application from an interested party or from Commissioner or any other person shall be examined by the Standing Committee and Screening committee as per rule 128(1) of CGST Rules.

So, bureaucrats who shall be members of a Standing Committee and Screening Committee has the power to determine the issues such as methodology, the procedure to keep a check on commensurate reduction in price etc.

Now, the question is how these crucial questions can be decided by executive body. All these functions are not in their domain; their work is to implement the law, not to decide the question of law. These are the matters which come under the purview of legislature/Judiciary.

This is an apparent case of [1]excessive delegation and in past, we all were a witness that the Court has struck down such legislation, rules or notification.

If you read Companies Act, Income Tax Act or any there legislation, you will find that penalties are prescribed in the Act itself, not in the rules.

There is no exaggeration to say that this is an encroachment on the power of Judiciary. To understand this is very easy if one look at the past and see, how long it had been taken to constitute the NCLT/NCLAT under the Companies Act, 2013. The same questions, which were put at that time, can be raised to judge the validity of this authority also.

As a concluding remark, it can be said that time will tell us the validity of this authority when the order passed by the Authority shall be challenged in the Court.

AUTHOR: CS ROHIT KUMAR | MOB. NO. 9555156805

Disclaimer: Any opinions or estimates contained in this publication represent the judgment of the author at this time and are subject to change without notice. Readers of this publication are advised to seek their own judgement before taking any course of action or decision, for which they are entirely responsible, based on the contents of this publication. The Author neither accepts or assumes any responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take.

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[1]According to the doctrine of excessive delegation, if the legislature excessively delegates its legislative function to any other authority, such delegation will be held unconstitutional.