BDO Indirect Tax News

India - Court upholds constitutionality of the anti-profiteering provisions in the CGST law

The Delhi High Court issued a decision on 29 January 2024 in which it upheld the constitutionality of the “anti-profiteering” provisions in the Central Goods and Services Tax Act. The concept of anti-profiteering in section 171 of the act is designed to ensure that a supplier of goods and/or services passes on the benefit of a reduction in the GST rate or an enhanced input tax credit to the consumer by way of a commensurate reduction in prices. However, section 171 does not set out the methodology or manner for determining whether a supplier has passed on the benefit.

Following the introduction of the CGST law, as well as subsequent GST rate reductions, many taxpayers filed complaints alleging that suppliers failed to pass on the benefits by way of a commensurate reduction in prices. This culminated in investigations by the Directorate General of Anti-Profiteering (DGAP) and adjudication by the National Anti-Profiteering Authority (NAA).

Taxpayers then challenged the orders issued by the NAA before the Delhi High Court arguing that the anti-profiteering provisions violate the fundamental rights guaranteed under India’s constitution. After a series of hearings, the High Court upheld the constitutionality of the provisions and it will now proceed to determine the validity of the individual orders based on the facts and circumstances of each case. However, it should be noted that the Delhi High Court order has been appealed to the Supreme Court, which is likely to hear the matter on 9 April 2024.

Gunjan Prabhakaran
Kartik Solanki
BDO in India
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