The proposed anti-profiteering body under the goods and services tax (GST) regime is likely to be set up under the framework of a restructured Central Board of Excise and Customs (CBEC). And, have both state and central officials.
The Centre's proposal on the structure is to be taken for discussion in the GST Council meeting on June 3. The meeting, to be chaired by Finance Minister Arun Jaitley, will also discuss the proposed rates for nine residual commodities — puja essentials, handicrafts, precious stones, precious metals, textiles, footwear, agricultural implements and biscuits.
It is also expected to take up the demand of the hybrid car industry, railways and some other key sectors, including fast moving consumer goods (FMCG), to revise rates.
In the proposal till now, the anti-profiteering entity is likely to be headed by an officer of the rank of chief commissioner. "It is almost final that the body will be set up under the CBEC framework. We are yet to decide the level at which the orders will be passed. The rules and powers are still being discussed," said an official who did not wish to be named.
CBEC will be renamed the Central Board of Indirect Taxes and Customs (CBIC) from the date of GST implementation, expected to be July 1.
The government decided on CBEC, considering its reach and personnel. "CCI (Competition Commission of India) or consumer forums would not be able to handle this, as they do not have the kind of reach that CBEC has. Besides, these are lean bodies, whereas CBEC has the manpower," said another official.
The anti-profiteering structure will be needed only for the initial one or two years after GST rollout, he added. "It is a deterrent mechanism, only needed for a limited period. Consumers need to feel satisfied, while suppliers and traders need to be aware that if the tax (GST credit) doesn't get passes on, they will be held accountable."
The body could take action on its own initiative or on the basis of information.
The Council in its next meeting is also likely to give final approval to the transition and return rules. Besides, as mentioned earlier, rates for nine commodities are yet to be finalised. "These include puja essentials and handicrafts. These were strongly taken up by the states and there will be a fresh round of discussion on these next week," said a state official.
Experts say they expect objective and transparent anti-profiteering rules. "Otherwise, it is going to be mayhem," said Bipin Sapra of consultancy EY. He says profiteering will need to be defined — whether it is based on the product or the businesses as a whole. "A company might be into five products, making profits in two and losses in three. Product-wise calculations will be difficult." Beside, do you look at the entire supply chain or the parent company to track profiteering?
Pratik Jain, partner at PwC India, said it was important for the government to work out guidelines on how to compute profits. "The guidelines need to be clear to avoid unwarranted litigation. Will the government look at profit of an entity as a whole or each product?"
Various sections have also asked the finance ministry to review rates decided earlier by the Council (though a senior official says such revisions would be rare).
The FMCG sector, for instance, wants jams and pickles in the 12 per cent tax bracket, as against the decision for 18 per cent. Small and medium enterprises, is the argument, would be otherwise hit. Automobile makers want a lower rate for hybrid cars, at the current incidence level of 30.3 per cent, as against 43 per cent (28, plus 15 per cent cess) decided by the Council. Roads minister Nitin Gadkari has said he'll argue this case with the finance minister. The railways ministry is also expected to argue against the five per cent service tax.