Introduction
The CBIC determined that the date of 1st April 2025 (Sunset clause) would be the last date on which no authority referred to in the CGST Act 2017 (Act) would take up cases on anti-profiteering grounds. However, pending matters (initiated before April 2025) shall be looked into by the relevant authority, which is the Appellate Tribunal (Tribunal) constituted under Section 109 of the Act. The Council, in its meeting, cited the stability in the transition of the GST regime since its introduction in 2017 and discussed the relevance of the Anti-profiteering provisions, leading to this notification. This development raised a question on the currency of the very mechanism and as to which authority, the aggrieved parties would approach other than the tribunal because the very provision of anti-profiteering in the CGST Act has been retained in section 171 in the Act.
The article shall mainly highlight the frequency of power shifts, leaving out the root problem hanging in the air- a lack of uniform methodology to be adopted by the authorities, and emphasizes its unseen implications on entities and business concerns. Now, with the sunset date announced, the beneficial implementation of the concept of anti-profiteering looks dim.
Persisting concerns- Passing the buck of enforcement power
“Profiteering” in GST refers to the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both, or the benefit of input tax credit to the recipient by way of “commensurate” reduction in the price of the goods or services or both. But, key terms “rate of tax”, “benefit” and “commensurate reduction in prices”, which are the soul of the antiprofiteering mandate, are regrettably not defined in the GST law. The shortcomings of this lacuna are observed in the further segments.
Rule 126 of the CGST rules, 2017 empowers an authority under Section 171 to determine the methodology and procedure for determination as to whether the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit has been passed on. This has been translated into NAA (methodology and procedure) rules, and the same in case of the CCI and the GST Appellate Tribunal GSTAT, which, upon plain reading, are mainly procedural and do not provide technical solutions. This is evident by the fact that there is abundant literature on the cases heard by the NAA in cases of reduction of tax rates/availability of ITC. The authority has applied principles without strict arithmetic precision, and this lack of a defined computation has led to decisions becoming more subjective than objective, with the element of subjectivity standing out in cases involving comparatively nuanced price rates and competitive dynamics. For instance, the NAA’s methodology in the estimation of profiteered amount was found to be incorrect in Director General of Anti-Profiteering v. Dange Enterprises (2022), and insufficient data led to the DGAP computing the amount without proper support and adequate data. In Ankit Kumar Bajoria & Sh. Subramanian Manjeri Ramanathan v. Hindustan Unilever Ltd., the NAA upheld the validity of passing benefits by way of increasing grammage of a product (extra quantity) while dismissing this approach in DGAP vs L’Oreal India Pvt Ltd, stating that an increase in grammage is not equivalent/akin to “commensurate reduction in prices”. This is one of the myriad instances in which the NAA has not accorded a uniform treatment to profiteering matters.
The need for underscoring this arises when it comes to remedial measures to be adopted by business concerns, whose strained focus is on ensuring that no product is profiteered to avoid unnecessary litigation. The Delhi High Court in the matter of Reckitt Benckiser cautioned that authorities must avoid arbitrary approaches, consider genuine cost offsets (e.g., input inflation, skewed ITC). Accordingly, businesses require a consistent, well-documented methodology for computing “benefit passed on,” rather than relying on ad-hoc spreadsheets.[1] However, rather than issuing guidance notes/ clarifications in meeting this requirement, the CBIC shifted the mantle to the Competition Commission of India (CCI), handing over the reins of section 171 as the “authority”, in place of the NAA. In its 48th meeting, the GST Council cited the expiry of the NAA’s tenure (which was previously 5 years as per rule 137, but has since been omitted) as the reason for entrusting the CCI with this responsibility. A prudent step would have been the extension of the tenure of the NAA, rather than omitting a provision and transferring power to an authority involved mainly in the adjudication of antitrust matters and those of market dominance. This misplaced shift was shortly followed by another, from the CCI to the Appellate Tribunal constituted under the Act. This was mainly due to inefficiency in ensuring speedy dispute resolution[2], a concern which was grappled with, more than the core concern of ensuring relief to business entities.
Quality vs Profit in Entity Growth
Following the power shift, several businesses have been subjected to profiteering charges in recent years, which have been justified by them as being in the course of economic changes. The problem arises when the rationale to increase prices has not been considered, which is valid considering the sector and industry of business. In the matter of Kumar Gandharv, the DGAP considered the factor of a 30 % inflation in the price of raw materials for the growth of paddy, for an 8% increase in the MRP of their product. The same argument was not considered in the matter of Jubilant Foods, in which the NAA stated that the company could have increased prices shortly after experiencing inflation, and as the date of increase in prices coincided with the reduction in tax rates, the action of the company was held mala fide though the company stated that this delay was due to repeated denial of ITC, and awaiting the implementation of the GST regime. In this case, the NAA had adopted an average price as the benchmark for the entire enterprise, irrespective of the type of products and the prices of each type. Profiteering is then calculated by comparing this averaged benchmark with the actual prices charged. However, while employing this approach, the NAA has effectively disregarded transactions where prices were below the average and, consequently, instances in which suppliers passed on the benefit to consumers beyond the mandated extent—reflected as negative price differentials—have not been accounted for. This denial of “netting off” resulted in an inflated and arbitrary figure of profiteering.
GST 2.0: Implications following the sunset clause
With these concerns abound, the central government enlightened the GST rates in India with a complete makeover, by bringing in newer slabs and reducing rates of several fast-moving consumer goods in September 2025. While the sunset clause dilutes anti profiteering, this notfication on the other hand calls for it. However, the Department of Consumer Affairs has recently allowed manufacturers to revise MRP on unsold stock due to the change in GST rates, and the revised price must be displayed by way of stamping, putting a sticker, or online printing. Here, point (ii) of the notification states that the difference between the revised price and the erstwhile retail price must not exceed the extent of the reduction in tax rates. For example, if the retail price of a product is 100 Rs, and the revised price is Rs x, the difference between them must not exceed the difference between the amounts from the two tax rates, in case of a tax reduction. The permission for display is valid until 31st December 2025 for all businesses. A similar notification was passed by the Department of Pharmaceuticals dated 12 September 2025, but it doesn’t mention conditions for the reduction of prices as specified in the former notification, or a tenure of validity, apart from allowing a similar display of the revised prices.
These directions mean that the government indirectly intends to prevent any kind of profiteering post-rate rationalisation by employing a flat formula for all entities of the related domains. However, this objective goes contrary to the irrefutable tendency of every business to reflect the increasing volatility in costs and labour on product prices, in order to avoid suppressed profits.
There is also a conflict between the notification on drug prices and the provisions of the Drugs (Price Control) order, 2013. Para 20 of the order prescribes that once a non-scheduled formulation/drug is launched, an increase of up to 10% of MRP, every 12 months is permitted. So, a manufacturer is free to increase the MRP of its drugs by 10% of the MRP as it existed during the preceding 12 months, at any time after the expiry of 12 months from the previous MRP increase. However, any increase in the MRP immediately, especially after the GST rate reduction attracts the anti-profiteering provisions. This legal impasse must be resolved.
Apart from the above concerns, there are a few that are entrenched in the mechanism long enough to have not been addressed till date. It mainly includes the lack of a definite limitation period within which prices of products (to be revised) can be targeted for anti-profiteering, and at the same time, a limitation period within which an aggrieved consumer can allege profiteering following an increase in base prices. The former becomes necessary to enable a business concern to determine changes to be made to its product prices and revise prices within a period of time, to avoid any complaints from consumers and at the same time, allow a smooth increase in the prices post expiry of the period.
Conclusion
Para 53 of the order on Jubilant Foods throws light on Article 14 of the Constitution, stating that its relevance mainly resides in preventing discrimination against consumers. But this provision must be applied proportionately to businesses too, and their concerns too are to be heeded. It is important to quell the presumption that the profiteering finds its way only into the pockets of consumers. While the sunset clause stands, the intent of the government regarding profiteering has remained unaltered, evident in the recent directions issued, which may be expected for other sectors as well. The acknowledgement by the NAA in several cases that the provisions of anti profiteering cannot be uniform and straitjacketed for all sectors of business, and vary from product to product, strengthens the argument of the need for developing separate guides for each sector. To effectuate the same, the concerns mentioned in this article are to be addressed.
Finally, keeping aside the history of the changes that were made in the anti profiteering mechanism since the inception of the GST law, the CBIC must actively focus on collaborating with sectoral regulators and institutions, issue sector-specific guidelines and notifications along with a uniform methodology based on the status and financial position of the entity, the operating domain and other aspects. This enables entities to develop effective anti-profiteering policies, being the priority.
Referenace
[1] https://www.lexology.com/library/detail.aspx?g=c5191a4a-83d3-4c49-a3a5-95d50ca7df42
[2] Agenda of the 53rd GST Council Meeting- Refer Agenda 3(iii) https://gstcouncil.gov.in/sites/default/files/Agenda/53rd_gstcm_agenda.pdf Minutes of the 55th GST Council Meeting- Refer Pg 150 https://gstcouncil.gov.in/sites/default/files/Minutes/minutes_of_55th_gst_council_for_upload_ocred_compressed_0.pdf
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Author: Darshan Rao, a qualified company secretary and 4th-year law student at Ramaiah College of Law
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