Informist, Tuesday, Aug. 19, 2025

By Priyasmita Dutta and Sagar Sen

NEW DELHI – In order to ensure consumers enjoy the benefits of the proposed lower goods and services tax, the government may have to bring back the GST anti-profiteering provisions, tax experts said. Prime Minister Narendra Modi has set the stage for a reduction in GST rates to boost consumption and address the long-standing public demand for lower indirect tax, but the success of the proposed move hinges on businesses passing on the cut without undue profiteering, experts said.

The risk of profiteering is acute as there have been occasions in the past when cuts in tax rates announced by the GST Council have not been passed on to consumers. Instead, companies have increased their profit margins. In November 2017, after the council reduced GST rates on restaurants to 5% from 18% and 12%, anti-profiteering investigations were initiated against some restaurants for allegedly not passing on the benefit of reduced taxes to customers.

According to experts, the GST Council can amend the sunset date of Apr. 1, 2025, for filing new anti-profiteering cases and make necessary changes to the existing law.

"Along with taking a call on GST rate cuts, anti-profiteering provisions will have to be brought in simultaneously as ultimately the goal of the GST rate cut is to ensure consumer is benefitted and that it boosts consumption demand," said Bimal Jain, Founder of A2Z Taxcorp LLP. "So anti-profiteering body will remain in the picture," he said, adding that the GST Council can decide to make necessary changes in Section 171 of the CGST Act, 2017, and remove the sunset date to give impetus to the proposed GST bonanza.

At its 53rd meeting, the GST Council had decided to introduce a sunset date for filing anti-profiteering cases to give businesses the autonomy to set prices for goods and services without the fear of being investigated for being in breach of anti-profiteering provisions. Under the anti-profiteering provisions of the GST law, it was mandatory for suppliers of goods and services to pass on the benefit of any reduction in the rate of tax, or the benefit of input tax credit, to recipients by way of a commensurate reduction in prices.

After the GST regime was rolled out in June 2017, the government had set up the National Anti-Profiteering Authority in November 2017 to check unfair profiteering by manufacturers and suppliers. The role of the authority included recommending punitive action against violators. The National Anti-Profiteering Authority was subsumed with the Competition Commission of India on Dec. 1, 2022, and then the competition watchdog passed on the baton to the principal bench of the GST Appellate Tribunal in October 2024 to hear anti-profiteering complaints.

The GST Appellate Tribunals will have to take up the job in a big way if the GST Council decides to remove the sunset date of filing anti-profiteering cases, and there lies a problem. Even after two years of the decision to set up the GST Appellate Tribunal with a primary bench in Delhi and benches in other states, they continue to have partial staffing leading to delays in becoming fully operational. According to experts, the GST Council may push for a time-bound action plan for appellate tribunals to see the light of the day.

Since October, the principal bench of GST Appellate Tribunal in New Delhi has pronounced only one order under anti-profiteering clause of the GST law.

The risk of profiteering has also been a bone of contention for the Council to cut GST on health and life insurance premiums. Though insurance products are homogenous, companies perform their own underwriting and product design, and products are priced accordingly. As such, even if GST rates are cut, companies can increase the base price of insurance policies so that the ultimate cost for policyholders remains unchanged.

While there is adequate reason for the GST Council to bring back anti-profiteering provisions, the government will have to also balance the ease of doing business, another key reform announced by the Prime Minister. Experts said the government may wait a bit before rolling out anti-profiteering provisions again given the expectation that industry will participate in the consumer-friendly move.

"Following the PM's announcement to reduce slabs and cut rates, I expect government will monitor industry for about three months and analyse whether benefit of lower tax rates is actually being passed to the consumers," said Ankur Gupta, Partner-Indirect Taxation at SW India, a tax and advisory services firm." In case government sees lower tax benefit is not passed, they may discuss and may amend the Act to bring back provision of anti-profiteering in same form or another," he said. End

Edited by Akul Nishant Akhoury

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