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  • Writer's pictureRFMLR RGNUL


This piece is authored by Mayank Singhal, a third-year B.A.LL.B (Hons.) student at Rajiv Gandhi National University of Law, Punjab.


With the rollout of GST in the year 2017, there was a need of Anti- Profiteering measures because it was witnessed that there was a surge in prices after the implementation of GST in some countries. In India, the provisions relating to Anti – Profiteering were adopted from Australian and Malaysian models of GST. The provisions are enacted to restrict profiteering by sellers. Profiteering is taking undue advantage which may occur in situations where the sellers do not pass the benefit of input tax credit or they do not reduce the prices with the reduction in tax rates of the product.


The provisions relating to anti – profiteering are mentioned in the Section 171 of the GST Act[i]. The clause (1) of the Section reads as, “Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.” The provision covers two aspects. First, if there is reduction in the tax rate, then the benefit must be passed. For example, initially there were 227 items in the 28% slab but now there are only 35 items. This entails the need of reduction in prices when the tax rates are reduced. Second requirement under the section, is to pass the benefit of input tax credit to buyers. It is pertinent to note that the provisions in the Act as well as the Rules do not elaborate upon meaning of “commensurate reduction” and the amount of benefit that has to be passed on. It may be a cause of uncertainty in the interpretation and application of the provisions.

Clauses (2) and (3) of the Section refers to the authority responsible for Anti-Profiteering. The government constituted National Anti-profiteering Authority as per the Section on 16th November, 2017 with its Nodal Office in New Delhi. State level Screening Committees are situated in twenty-nine States and three UTs. Powers, Duties and Compliance with the orders of the Anti-Profiteering Authority are laid down under Rules 122 to 137 of CGST Rules, 2017.


The measures relating to anti-profiteering are for consumer welfare but they suffer from the vice of excessive delegation. The National Anti-Profiteering Authority is empowered under the Section 171 of the Act to ensure benefit of reduction in tax rates and input tax credit is passed. But the powers of the Authority viz. levy of interest, penalty imposition, cancellation of registration etc. do not flow from the Act but solely from Anti- Profiteering Rules. It is a general rule that essential functions cannot be delegated by the Legislature. The court has reiterated the principle in various cases including Delhi Municipal Corporation v. Birla Cotton Spinning and Spinning Mills[ii], the court held that the legislature must retain in its hand essential legislative functions and ‘what can be delegated is sub-ordinate legislation that is necessary for the implementation of the objectives and purposes of the Act.’ The Anti- Profiteering measures under CGST Act do not provide guidelines for the Authority, which are backed only by way of delegated legislation. Also, the term ‘commensurate reduction’ used in Section 171 of the CGST Act has not been defined or explained, which causes uncertainty. The vagueness might give rise to different interpretations by the bureaucrats leading to excessive discretion in their hands. Thus, the legislature must provide the guidance for implementation of the Anti-Profiteering measures by way of an amendment in the CGST Act. Moreover, on 12th October, 2018, Delhi High Court admitted a petition filed by a Real Estate firm challenging the Constitutional validity of the Anti – Profiteering provisions for lack of clarity and violation of fundamental rights of citizens, the court has stayed the order by National Anti-Profiteering Authority (NAA) which had levied a penalty over Pyramid Infratech Private Limited for profiteering.[iii] The case is currently pending before the Delhi High Court.


Anti – Profiteering provisions in India are inspired from Australian and Malaysian GST Laws. Australia introduced the GST in the year 2000 and the Australian Competition and Consumer Commission (ACCC) was formed for overseeing the pricing. The ‘Net Dollar Margin Rule’ was followed. According to which, if the GST leads to reduction in taxes and costs by $1, then the prices must also fall by $1. There are various lessons which can be learnt from the Australian Law. The Australian Agency conducted retail pricing surveys pre and post GST, it did not rely solely upon complaints received from consumers. Detailed guidance for the stakeholders i.e. businessman, consumers and authorities must be framed so that there is no fear regarding the anti- profiteering provisions. The stakeholders must be provided with clarity upon issues like the method of determining profiteering, what course of action is to be taken upon the reduction in the tax rates by the manufacturers and the sellers etc.

In Malaysia, similar provisions were enacted to check inflation through Price Control and Anti Profiteering Regulation (PCAR). The role of PCAR was to ascertain Net Profit Margin for every product. Any profit above that margin was termed as unreasonably high profit and it could be penalized under new law. The determination of Net Profit Margin involved not only tax rates and input tax credit but also other factors impacting economic scenario like supply and demand conditions, supplier costs etc.


1. In the case of Ankur Jain v. Kunj Lab Marketing[iv], the Maggi Noodles Dealer was held liable as he had not passed on benefits of reduction of tax from 18% to 12 %.

2. In Rishi Gupta v. Flipkart Internet (P) Ltd.,[v] the petitioner alleged that the Respondent had not refunded the difference in amount which occurred due to a reduction in tax rate from 28 % to 18%. The Authority found the base price has not been changed. The discount which was offered earlier was from the profit of the seller. Moreover, Flipkart was only providing platform to the sellers and is not accountable.

3. In Hindustan Unilever Ltd. v. UOI & ors[vi], the National Anti-Profiteering Agency imposed a penalty of 383 Crores for not passing the benefit of reduction of tax cut from 28 percent to 18 percent. The company contents that it had deposited the amount after calculation in the Consumer Fund or passed through grammage. Hindustan Unilever has approached Delhi High Court and currently the case is pending.


The experience of Australian and Malaysian GST Regime makes it amply clear that the effective implementation of GST requires effective Price Control Mechanism. The Price Control Mechanism would ensure that the consumers are benefitted from reduction in tax rates by way of lower prices and the business houses are not taking undue advantage of the tax rate reduction. The Anti – Profiteering provisions from a wider perspective are essential for consumer welfare and for promoting the acceptance of GST among the taxpayers. However, there are still some lacunas which need to be removed to ensure that the mechanism works efficiently. Firstly, there is a need to provide clarity in the provisions in form of detailed guidelines for the business houses. The method to calculate deductions and way of passing benefit must be detailed. The meaning of term ‘commensurate reduction’ must be made clear. Secondly, the bureaucrats must not be endowed with excessive discretionary powers to determine profiteering as it will lead to uncertainty and misuse of such power. Further, complete reliance must not be placed on complaints by consumers; rather the price survey method used in Australia may be adopted for some specific commodities which have undergone significant reduction in the tax rates.

Responsibility for the information and views set out in this Article lies entirely with the authors. Reproduction is authorised provided the source is duly acknowledged.

[i] The Central Goods and Services Tax Act, 2017, No. 12 of 2017.

[iii] M/s Pyramid Infratech Private Limited v. Union of India & Ors., Delhi HC, W.P.(C) 10999/2018.

[iv] Ankur Jain v. Kunj Lab Marketing, NAA Order No. 10 of 2018.

[v] Rishi Gupta v. Flipkart Internet (P) Ltd, NAA Order No. 5 of 2018.

[vi] Hindustan Unilever Ltd. v. UOI & ors, Delhi HC, W.P.(C) 378/2019.


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