Narendra Modi government allays fears of 'inspector raj' under GST

The Economic Times By TNN Nov 28, 2016, 06.13 PM IST

NEW DELHI: Addressing fears that an "anti-profiteering" clause in the draft goods and services tax (GST) law may spell the return of inspector raj, the Centre stressed that the provision is an enabling element and will be invoked only in the event of significant violations.

"The clause is an enabling provision in case it is noticed that intended benefits of a GST law are not being passed on to consumers. The government has no plans to set up an inspection machinery and no punishment has been prescribed," revenue secretary Hasmukh Adhia told TOI.

The provision was made a part of the draft GST laws released on Saturday to ensure that the Centre has an option in dealing with traders who do not pass on to consumers any reductions under the tax reform measures. This is seen as a step to protect consumers against any price spike. The view in the government that there was a need for a redressal option was strengthened by the experience of demonetisation as individuals and business entities hunted for inventive means to beat the ban on old currency.

The Centre is, however, keen to assure investors that it does not intend to set up any authority to inspect transactions and the job, if need be, can be done by empowered consumer forums or similar bodies.

The GST is intended as a "one nation, one tax" solution and this objective as well as the government's credibility will be hurt if refunds are suppressed and an additional charge is levied on consumers. As politics over demonetisation rocks the Centre's plans to pass two GST related bills, the government feels that states -particularly those like West Bengal which stand to benefit -should consider whether they can turn down an assured bonanza of 14 per cent return once the ambitious tax reform measure is rolled out.

Trinamool chief Mamata Banerjee has demanded an outright rollback of demonetisation with West Bengal finance minister Amit Mitra warning that scrapping of Rs 500 and Rs 1,000 notes was a "double whammy" for the poor along with GST.

Government sources feel states like West Bengal stand to lose a great deal if the tax reform is delayed, all the more as Banerjee had persistently complained of high debt burdens inherited from the Left which she wants to be mitigated.

Implementation of GST is seen to be benefitting both the Centre and the states.States will also be compen sated for any revenue loss."In these daunting time, where will you get a 14% assured return," said a source.

It would be unfortunate if the ongoing negotiations on administrative control over goods and services below Rs 1.5 crore are derailed due to the political feuding over demonetisation, the government feels. "A call has to be taken by states like West Bengal, Odisha and Uttar Pradesh if they want to miss out on a potent revenue stream due to the politics over demonetisation which in any case cannot be rolled back now," the source said.

PM Narendra Modi had said criticism of demonetisation was really rooted in anguish over no one being given a warning of the impending decision. Despite opposition parties reacting sharply to the statement, the ruling side remains hopeful of normalcy in Parliament after the 'Aakrosh Divas' is over on Monday.

Congress leaders are not so certain as they feel the substantial opposition unity can be used to keep up the pressure on the government and perhaps ensure that the winter session does not transact important business like GST bills.

The plans have worked so far despite faultlines in the opposition that have seen Congress and Left keep a distance from Trinamool and AAP while others like BJD and TRS have not joined protests. The announcement of Janata Dal (U) that it will not take part in the protest on Monday is another indication that political alignments remain fluid.

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