During the transition period of Australia's 17-year-old Goods and Services Tax regime, the Australian Competition and Consumer Commission (ACCC) considered over 51,000 complaints, investigated approximately 7,000 matters and obtained refunds of around $21 million on behalf of approximately two million consumers. A dedicated GST-pricing call centre received over 180,000 GST-related calls in the three-year transition period between 1999 and 2002, according to a report by ACCC on pricing responses to the introduction GST.
Malaysia's relatively younger, two-year old, anti-profiteering regime saw inspections of 188,410 business premises and investigations in 642 cases within the first month of its GST regime.
Similar to India, the GST regime in both Australia and Malaysia came equipped with anti-profiteering provisions. They lasted for three years in Australia and Malaysia recently narrowed their scope to only food and beverage and household goods.
In hindisght, the Malaysia rules worked better as a stick for the authorities to wave, rather than actually use, Robert Tsang, head of Deloitte's indirect tax practice in Southeast Asia told, BloombergQuint.
They worked well in retail, in F&B, and inspecific sectors where targeted action was taken. Overall impact though was, by most measuresand in the view of most observers, very small.Robert Tsang, Indirect Tax Leader- Southeast Asia, Deloitte
Beat The GST
In Australia, businesses were disciplined for profiteering conduct both pre- and post-GST. Ahead of the tax being implemented, advertising campaigns by commerial establishments - such as ‘Beat The GST' by Discount Electrical Centre and ‘Last chance to buy … GST Free' by Goldy Motors, lead to compensation and refund orders against these businesses.
General stores operator IBIS was forced to review its prices and provide refunds to customers post GST as the ACCC expressed concerns that the company had increased some of its prices by up to 22 percent, including on GST-free items. Similarly, four Aus-Care medical centres had to review their billing practices to ensure there was no GST component on any GST-free services, publish a corrective apology, refund patients who were charged GST on Hepatitis B vaccinations and implement a trade practices compliance program.
Almost 30 businesses had to give court-enforceable undertakings, Katrina Groshinski, a partner at Australian law firm MinterEllison, told BloombergQuint
The ACCC had issuedguidelines on price exploitation and they came up with two key rules. One wasthe dollar margin rule which meant that businesses were barred from makingundue profits by altering their profit margin. The second one was the pricingrule that said no price should increase by more than 10 percent.Katrina Groshinski, Partner, MinterEllison
Unreasonable price increases were also held to be against the law, she added. Businesses weren't allowed to attribute higher prices to GST if in fact they chose to increase them by larger amounts; for instance, a price increase of 6 percent when it should've been only 3 percent, Groshinski pointed out.
Nasi Lemak
In Malaysia, most enforcement actions are a result of whistle-blowing by a disgruntled customer or an unhappy client, Tsang explained.
The fallout from the biggest cases was clearly an impact on reputation inthe main, though there were penalties and restitution measures imposedtoo. A lesson for everyone in India during the transition period is – listen to the customer and react in apositive, proactive way to ensure that small issues do not become big problems.Robert Tsang, Indirect Tax Leader- Southeast Asia, Deloitte
Some of the successful enforcement actions in Malaysia include a fine of $2000 on a company selling mobile phones that failed to substantiate via documents an increase in price of SIM cards, $7000 on a supermarket operator for making unreasonable profits on honey and a fine of almost $1000 on a restaurant that increased the price of nasi lemak, a rice preparation, without any justification.
The penalties were calculated as per a mechanism provided in the law.
In Malaysia there is a profit margin mechanism and methodology defined, comparing margin at one point in time with margin arising from pricing at a different point in time, Tsang explained.
So far, measures back home include rules that lay down the constitution of an anti-profiteering authority and its powers. But the method to determine profiteering conduct has not been notified as yet. Also, businesses have been allowed to use stickers of revised prices on transition stock. But any increase in prices will require the manufacturer, packer or importer to give at least two advertisements in two or more newspapers informing consumers about the change. And you know who'll be watching the ads closely.
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