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GST regime: Anti-profiteering body likely to be under CBEC framework

The body structure will be taken up for discussion at the GST Council meeting on June 3

Dilasha Seth  |  New Delhi 

Photo: Shutterstock
Photo: Shutterstock

The proposed body under the (GST) regime is likely to be set up under the framework of a restructured (CBEC). And, have both state and central officials.

The Centre’s proposal on the structure is to be taken for discussion in the Council meeting on June 3. The meet, to be chaired by Finance Minister Arun Jaitley, will also discuss the proposed rates for nine residual commodities — 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 entity is likely to be headed by an officer of the rank of chief commissioner. “It is almost final that the body would be set up under the 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. 

The will be renamed the (CBIC) from the date of implementation, expected to be July 1. 

The government decided on CBEC, considering its reach and personnel. “The  (competition commission) or consumer forums would not be able to handle this, as they do not have the kind of reach that the has. Besides, these are the lean bodies, whereas the has the manpower,” said another official. 

The structure will be needed only for the initial one or two years after the 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 (credit) doesn’t get passed 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 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 says they expect objective and transparent 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 businesss as a whole. “A company might be into five products, making profits in two and losses in three. Product-wise calculations will be difficult.” Besides, do you look at the entire supply chain or the parent company to track profiteering?

Pratik Jain, partner, PwC India, said it would be important for the government to work out guidelines for the industry on profit computation. “The guidelines need to be clear to avoid unwarranted litigation. It is important to determine whether the government will look at profiteering by entity as a  whole or for each product,” he said. 

Jain added the proposed structure of the body was likely to be more like a watchdog where it would gather intelligence and carry out inquiry in specific cases.

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.

New start 

  • The new entity to comprise Centre and state officials, and likely to be headed by a chief commissioner level officer
  • To be discussed in the Council meeting on June 3
  • Rates for the nine remaining items, including biscuits, handicrafts, textiles, footwear and gold, also to be discussed in the meeting
  • Rules for transition and returns may be finalised