Delhi HC upholds validity of anti-profiteering provisions under GST

The court held that anti profiteering provisions pertain to commensurate reduction of prices when gst rates are reduced or due to input tax credit and hence these provisions are in public interest

The Delhi High Court on Monday upheld the constitutional validity of anti-profiteering provisions in the Goods and Services Tax (GST). More than 100 companies, including Hindustan Unilever, Patanjali, Jubilant Foodworks, and Phillips, filed petitions against the provisions.  

The court held that the provisions pertain to a commensurate reduction of prices when GST rates are reduced or due to input tax credit and hence these provisions are in the public interest. They are in line with legislative powers given under the Constitution.

The court, comprising a bench of acting Chief Justice Manmohan and Justice Dinesh Kumar Sharma, also provided a breather to the companies as it did not rule out the possibility of them hiking prices due to cost escalation, skewed input tax credit (ITC) and arbitrary use of power beyond jurisdiction by anti-profiteering bodies in some cases which would now be determined based on facts and numbers.

 

An appropriate remedy would be to get these matters listed before the division bench for directions on February 8, said the court.

"Thereafter, these matters would be listed wherein these aspects of jurisdiction, cost escalation, ITC skewed situation will now be addressed on a case-by-case basis," said Abhishek Rastogi, founder of Rastogi Chambers, who argued the petitions of some companies in the case.

Companies challenged the constitutional validity of the provisions in the absence of any formulae for determining profiteering. The court ruled that no fixed or mathematical formula can be laid down for determining anti-profiteering.

However, it provided clarity on how profiteered amounts are to be distributed among home buyers. It said the benefit would be distributed based on per square feet. This meant that equal benefits would be given for equal space to home buyers.  As such, the buyers would get benefits according to the area of house.

The National Anti-Profiteering Authority (NAA) was set up in November 2017 to ensure that companies pass on the benefits of ITC and GST reduction to consumers by way of reduction in prices. It has been the experience of many countries that when GST was introduced, there was a marked increase in inflation and the prices of commodities. NAA was constituted to check this for two years initially but its tenure was extended later a couple of times. The Competition Commission of India has been looking into complaints of profiteering against companies since December 2022.