Anti-profiteering: Govt tilts at windmills

The Narendra Modi government’s defence of the proposed “anti-profiteering” provision in the draft goods and services tax (GST) legislation exposes its poor understanding of a most important concept—the rule of law. This can have a deleterious effect on its bid to attract investors for development and job generation.

Apparently in response to the fears expressed by industry representatives that the proposed clause would give a new lease of life to the dreaded inspector raj, the government said that it was just “an enabling provision.” Some kind of emergency measure to be invoked only to deal with serious 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 The Times Of India (November 29).

To begin with, no government needs any enabling provision: it can requisition the properties of citizens in the event of war or other emergencies; government can nationalize any private entity if it deems it fit; it can amend the constitution; it can curtail fundamental rights; it can demonetize the national currency; it can wage war and make peace. And I am talking about democratic countries only; governments in totalitarian states also can and do indulge in crimes against mankind. Therefore, to claim that the Indian government needs an enabling provision is like saying Mukesh Ambani needs fuel subsidy to keep his kitchen running.

The government stand on the subject is not much different from the one on Section 66A of the Indian Penal Code and retrospective taxation. Additional Solicitor General Tushar Mehta stressed upon the need to continue with the draconian section 66A, arguing that it couldn’t be outlawed just because of it could be misused. “If the medicine is bitter, then we can have sugar after it instead of throwing the medicine. People have to take the medicine as it is for their benefit,” he told the apex court in February 2015.

In its landmark judgment, the Supreme Court said, “If Section 66A is otherwise invalid, it cannot be saved by an assurance from the learned additional solicitor general that it will be administered in a reasonable manner. Governments may come and governments may go but Section 66A goes on forever. An assurance from the present government even if carried out faithfully would not bind any successor government. It must, therefore, be held that Section 66A must be judged on its own merits without any reference to how well it may be administered.”

The same principle stands true for retrospective taxation. In this case, the verdict of investors—in their lukewarm response to Modi’s ardent wooing—should have had a sobering effect on his government. But, alas, that is not to be! Now, the powers that be want to introduce an anti-profiteering clause, knowing well about its potential misuse. This peculiarly perverse doctrine can be summed up as: we know this is draconian but we are good people and won’t act nastily. The doctrine flies in the face of the rule of law, and occasions the antithetical doctrine—the rule of men.

Further, it is not possible to even define what ‘profiteering’ is, let alone chalk out a mechanism to detect it in the gargantuan process called economic activity in a country. Do the babus of economic ministries want to stipulate ‘fair profit’ margins in every sector? Would they monitor the functioning of each company and forensically audit their accounts? If yes, do they have the competence and the wherewithal to do that? Does the government have the bandwidth to carry out such a humungous exercise on a regular basis? Not only humungous but also quixotic because, since no definition on profiteering is possible, an army of bureaucrats would only be tilting at windmills all the time.

A Congress prime minister, under the tutelage of Left-leaning Sonia Gandhi, coming up with such statist measures is understandable; but Modi wants to bolster development in India; he wants our country to rise in the doing business index. It is beyond comprehension why he allows functionaries under him to promote anti-business measures.