Supreme Court issues notice to Central Government on GST anti-profiteering provisions
On 12 February, 2024, the Supreme Court of India issued a notice to the union government regarding a case concerning the constitutional validity of anti-profiteering measures within the goods and services tax (GST) framework. A three-judge bench of the Apex Court consisting of CJI D Y Chandrachud, Justice J B Pardiwala, and Justice Manoj Misra heard a special leave petition challenging the Delhi High Court’s decision upholding the constitutional validity of the provisions.
The petitioner, Excel Rasayan Private Ltd, a detergent manufacturer, contended that the High Court overlooked the fact that the challenged provisions are beyond the constitutional scope. This marks the first petition in the Supreme Court against the High Court’s ruling, with several other companies expected to follow suit, according to sources. Abhishek Rastogi, the petitioner’s counsel, argued that the indefinite time limit for anti-profiteering measures presents substantial challenges for businesses.
The National Anti-Profiteering Authority (NAA), established in November 2017 under these provisions, ensures companies pass on benefits of input tax credit (ITC) and GST reductions to consumers through price reductions. Many countries experienced increased inflation and commodity prices upon introducing GST, prompting the formation of the NAA initially for a two-year term, which was subsequently extended multiple times. The Competition Commission of India has been addressing profiteering complaints against companies since December 2022.
Rastogi, founder of Rastogi Chambers law firm, contended that the absence of a clear methodology renders the anti-profiteering provisions arbitrary and vague. The Delhi High Court previously determined that no fixed or mathematical formula could be prescribed for anti-profiteering determinations. Over 100 companies, including Hindustan Unilever, Patanjali, Jubilant Foodworks, and Phillips, filed petitions against these provisions in the High Court.
The court concluded that the provisions aim to ensure a proportionate reduction in prices following GST rate reductions or due to input tax credit, serving the public interest. It upheld that these provisions fall within the legislative powers granted by the constitution.