TaxTMI 
TaxTMI 
TaxTMI 
Section 171 of the Central Goods and Services Tax Act, 2017 obligates businesses to pass on the benefit of tax rate reductions and input tax credit to consumers by way of commensurate price reduction. Enforced initially through the National Anti-Profiteering Authority (NAA), these provisions have generated considerable litigation and controversy.
In Kerala, the then Finance Minister Dr. T.M. Thomas Isaac spearheaded their use. I had occasion to defend a distributor accused of not passing on credit. The allegation was based on flawed computation, while the manufacturer’s independent price hike—merely collected downstream—was overlooked. Proceedings thus narrowed to penalising the distributor, leaving the real pricing decision untouched. Such enforcement asymmetry raised questions about fairness and practicality.
With the GST Council now moving towards a rationalised two-rate structure, it is timely to assess whether anti-profiteering retains any meaningful role.
Judicial and Practical Challenges
The jurisprudence around Section 171 has been shaped by recurring themes:
- Lack of methodology: Courts have noted the absence of a codified formula. In Abbott Healthcare Private Limited & Anr. Versus Union Of India & Ors. - 2019 (5) TMI 563 - DELHI HIGH COURT, the methodology adopted by the DGAP was criticised for lack of statutory backing.
- Procedural fairness: In Shree Sai Industries v. Union of India [(2022) 65 GSTL 257 (Del.)], questions arose on natural justice and validity of extended investigations.
- Overreach into pricing: The Delhi High Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India [(2021) 86 GST 257] observed that anti-profiteering proceedings cannot amount to price control under the guise of tax administration.
These cases reflect the structural weakness of Section 171: it seeks to police pricing without a clear statutory framework, leading to arbitrary outcomes.
Two-Rate GST: A Different Landscape
A rationalised two-rate GST alters the compliance terrain significantly:
- Reduced Triggers: With fewer slabs, the frequency of rate revisions—and consequently the scope for profiteering allegations—shrinks.
- Smoother Credit Chains: Simplified classification reduces disputes on cascading benefits, thereby limiting scope for alleged retention.
- Greater Transparency: Stable rates enhance predictability, allowing consumers and trade alike to track pricing with more clarity.
The Future Role of Anti-Profiteering
Going forward, anti-profiteering may survive only in a residual sense:
- Transitional Oversight: During the shift to a dual-rate system, to ensure benefits of downward revision are not withheld.
- Exceptional Circumstances: To address rare, targeted rate cuts on essentials (e.g., COVID-related exemptions).
- Integration with Competition Law: With NAA’s mandate now subsumed under the Competition Commission of India (CCI), profiteering disputes will be examined as matters of unfair trade practice, not tax enforcement.
Comparative Experience
- Australia: Anti-profiteering provisions introduced during its GST rollout in 2000 were phased out within two years.
- Malaysia: Retained briefly to cushion consumers during transition, then allowed to lapse.
- India: Likely to follow this trajectory—using anti-profiteering only as a temporary measure before allowing the law to sunset.
Conclusion
India’s anti-profiteering law has largely served its transitional purpose. In a simplified two-rate GST regime, its continued existence appears redundant. Beyond the transitional period, profiteering disputes are better addressed within the broader framework of competition and consumer law, where market dynamics—not administrative orders—decide price fairness.
For policymakers, especially those who once strongly defended the law, the lesson is clear: anti-profiteering should not outlive its relevance. A mature GST must rely on transparency, competition, and consumer choice, not statutory price control.