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GST anti-profiteering law, no fresh cases after this fiscal

Starting April 1, 2025, tax authorities will not register any fresh case of “profiteering” under the Goods and Services Tax (GST) regime, the Central Board of Indirect Taxes and Customs (CBIC) has said. This would mark the end of the 2017-born ant-profiteering regime under the GST framework, which has remained controversial due to its incompatibility with free market principles.

The anti-profiteering mechanism, examines whether input tax credits (ITC) availed by any registered person or the reduction in the tax rate have actually resulted in a “commensurate reduction in the price of the goods or services or both” supplied by that person.

The CBIC, in a notification dated September 30, said from April 1 next year, the authority designated to look into cases of profiteering shall not accept any request for examination. Additionally, through a separate order, it transferred the mandate of adjudicating complaints of profiteering from the Competition Commission of India (CCI) to the Principal Bench of the GST Appellate Tribunal (GSTAT), effective Tuesday. The GSTAT will hear the past profiteering cases, and the new ones registered till March 31, 2025.

According to Abhishek A Rastogi, founder, Rastogi Chambers, this shift (from CCI to GSTAT) would expedite the legal process and help resolve long-standing cases concerning the computation of the quantum of profiteering, which have been delayed for an extended period.

Sandeep Sehgal, partner-Tax, AKM Global said: “The move also aims to enhance efficiency by reducing the burden on CCI and ensuring cases are resolved under the tax-specific mechanisms of GSTAT.”

To be precise, Section 171 of the CGST Act says any wilful action of not passing on these benefits to the recipients will be treated as profiteering. The government had set up the National Anti-Profiteering Authority (NAA) in 2017 to oversee profiteering. However, it wasn’t so effective in recovering the amounts clocked by firms via profiteering, and was dissolved in December 2022. Since then, the CCI has been dealing with the cases of profiteering.

At present, over 100 companies, ranging from real estate to fast moving consumer goods (FMCG) have filed petitions against anti-profiteering norms in the Supreme Court. As per sources, the total amount stuck in litigation is around Rs 2,000 crore.

In April, the apex court had issued notices to the Finance Ministry, CBIC, and the GST Council to reply on the claims of the constitutional validity of the anti-profiteering norms. The next hearing on the matter will be on October 22.

Earlier, in January 2023, the Delhi High Court had upheld the relevant sections of the CGST Act and rules pertaining to anti-profiteering. The HC had ruled that the anti-profiteering provisions are not a “price-fixing mechanism” and do not violate Article 19 or Article 300A of the Constitution. This judgement was a setback to over 100 companies, including Hindustan Unilever, Nestle, Patanjali, Excel Rasayan and Philips, who had received recovery notices from NAA.

Rajat Bose, partner, Shardul Amarchand Mangaldas & Co said that sunset clause for anti-profiteering enables businesses to be flexible on prices based on actual costs incurred and market price trends. “This will enable businesses to factor in market conditions to determine prices of their goods,” he said.

Rastogi also said that the proposed rate rationalization by the GST Council will become more meaningful in the absence of the anti-profiteering provisions.

Please click here to view the full story on Financial Express.