Just a day after the Centre notified the latest set of GST cuts on products, the Union Cabinet on Thursday prompted the creation of the National Anti-profiteering Authority to ensure that businesses pass on the benefits of the GST to the customers. 

This decision comes in the wake of reports suggesting that retail outlets and restaurants are charging extra costs.Thus, the formation of the enforcement body will ensure that the consumers get the benefits of the rate cuts. It will also ensure that the latest tax rate reductions approved by the GST Council on more than 200 items are implemented immediately by businesses. The authority has been granted wide-ranging powers, including cancellation of registration of offending firms in extreme cases.

According to the Hindu, the government said in a release, "The Union Cabinet has given its approval for the creation of the posts of Chairman and Technical Members of the National Anti-profiteering Authority (NAA) under GST, following up immediately on yesterday’s sharp reduction in the GST rates of a large number of items of mass consumption."

It also added, “This paves the way for the immediate establishment of this apex body, which is mandated to ensure that the benefits of the reduction in GST rates on goods or services are passed on to the ultimate consumers by way of a reduction in prices.”

Last Friday, the GST Council held that restaurants had failed to pass on the benefits of the GST to its customers. It also decided to remove restaurants' ability to avail themselves of input tax credit while at the same time slashing the final tax rate to 5%.

Meanwhile, the changes including removal of input tax credit immediately spurred controversy, with some restaurants including McDonald's raising their pre-tax base prices, without changing the total bill charged to the customers. Restaurant chains like McDonald's justify their stance on social media, saying, "The government has brought down GST from 18% to 5%, but there has been a removal of input tax credit. Due to this, our operating costs have gone up. However, keeping customer convenience in mind we have structured the changes in such a manner that total amount paid by the customer remains the same.”

The release further said, "The ‘anti-profiteering’ measures enshrined in the GST law provide an institutional mechanism to ensure that the full benefits of input tax credits and reduced GST rates on supply of goods or services flow to the consumers. This institutional framework comprises the NAA, a Standing Committee, Screening Committees in every state and the Directorate General of Safeguards in the Central Board of Excise & Customs (CBEC).”

According to the rules, the NAA has the authority to order the supplier to reduce prices or return the undue benefit availed by it along with benefits in the Consumer Welfare Fund. The release said, "In extreme cases, the NAA can impose a penalty on the defaulting business entity and even order the cancellation of its registration under GST."

“The provisions of penalty for making excessive profiteering and even cancellation of registration of such taxpayers will certainly help in achieving the objective of establishing this body,” Aditya Singhania, DGM GST, Taxmann, wrote in a note. “The measure will certainly keep a check on inflation as it will help in monitoring the prices of the products for which rate cuts have been made."

Some experts believe that the GST rate cuts are not enough and that they come with a lot of impleenting challenges as to how to pass the benefit. Industry specialists, thus, seek detailed industrial guidelines by the GST Council.