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Anti-profiteering Clause in GST is Transitory, will Act as Deterrent


If there's rampant profiteering in certain sectors after GST, govt may seek explanations but only from oligopolies or in cases of imperfect competition
After passage of the Goods and Services Tax bills in the Lok Sabha, industry has expressed apprehension over the clause on anti-profiteering. Revenue Secretary Hasmukh Adhia allayed these fears in an interview to ET's Deepshikha Sikarwar, saying the government may not need to apply the clause at all. He said it is only an enabling provision that will likely be enforced only in the initial period of implementation. Edited excerpts:
The GST Bills have received Lok Sabha's nod.What's the action plan going forward?
First is massive industry outreach to ensure smooth implementation. The Centre and states will have to jointly carry out this outreach to every corner of the country so that no area is left uncovered. Second is training of officers.They have already undergone one-week training programme. Nearly 51,000 officers have been trained. We have to now move to IT training, which has already started, on a massive scale. IT training will have to be given to traders as well as GST will be completely an IT-driven tax. Third is the change management for the bureaucracy both at the Centre and states. Both the Centre and the states will have to ensure that there is acceptability of the new system.
There is a carve-out for Jammu & Kashmir.
This carve-out is only for the purpose for legislating it. A law automatically does not apply to them because of the state's special status. They have already assured us that they will be taking it up. Once they complete the process, we can cover the state under Central GST under the difficulties removal clause. It is not possible for any state to remain outside GST.
What is the status of IT preparedness? Industry now wants the rollout in September
We are constantly monitoring preparedness of the GSTN, CBEC's backend systems and those states that are doing their own IT setup. They are well on track. There is no problem at our end. I am a little surprised, they were in the know of the deadlines and we have been talking and demonstrating achievement of milestone after milestone on the timeline.They should realise that they have three months to prepare. And, it's doable.
Industry is rattled by the anti-profiteering clause. Will this provision be actively pursued?
First of all, we may or may not need to apply the provisions of the anti-profiteering clause.It is an enabling clause and is only there as a deterrent. It only says that nobody is allowed to profit from taxation regime change. The GST is a new tax regime and it will give you some profit with seamless input tax credit. So, the profit should be passed on to consumers. What is wrong in mandating this? Whoever is making profit due to the regime change must pass it on. This is the first mandate of the act.This mandate also has to be supervised. If, after rollout of GST, it is seen that there is rampant profiteering in certain sectors and the government gets complaints about it, it will have to nominate some agency to look at them and ask for explanation. But this may happen only in select cases of oligopolies or where there is imperfect competition. But in sectors that have competition there may not be any complaints as market forces will not allow it. It is only a transitory provision. It will happen only during the first year or second year of implementation, in all likelihood, in only the first year of implementation of GST.We have to be watchful and the government has to have powers to deal with the situation.So, we have said we will ask one of the agencies to look into it.
Which agency would look at these complaints?
We have not yet decided. We could even ask the Competition Commission or give to any other agency. We are yet to prescribe a procedure for it as what happens when such an act takes place, what will be the fine. These would be out before July 1.
There are apprehensions that all government services such as issuance of passport or birth certificate may come under tax net...
A number of government services are under already service tax. Only those will be taxed under GST. For example, right of way is a government service that is taxed.Immediately, we do not want to expand the list. We want smooth landing and as far as possible we would try not to expand the list to ensure that transition is smooth. No, nobody needs to start worrying that this or that service would be taxed.
What about excise-free zones or VAT exemptions?
When you have systems of taxation that have seamless flow of credit from one state to another, then there can be no exemption because if there is an exemption the person on the other side would not get input tax credit.Right in the first meeting of the GST Council it was decided that there will be no such exemptions. And, if any state or the Central government wants to give any incentive to industry, it would be direct benefit by way of reimbursement of tax. Industry can apply for reimbursement and that can be given by the government out of its budget directly. As far as the Centre is concerned, we have given certain exemptions in some states to some industries.Those commitments will be respected but we will give only 58% of Central GST. As of now when we collect tax, 42% of it will go to states and whatever will be left with us will be passed on. The Department of Industrial Policy and Promotion will have to make a scheme for it. We have already written to them about it.These nuts and bolts are being fixed now.

Economic Times New Delhi,31st March 2017                          

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