Why Govt May Revive Anti-Profiteering Authority Post-GST Cuts

The 56th meeting of the Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, is currently under way in New Delhi. The two-day meeting is expected to approve a proposal to overhaul the current GST rate slabs by removing the 12% and 28% rates.

According to earlier reports, the Council has already approved a proposal by a group of ministers (GoM) recommending a dual-structure GST model of 5% and 18%. Moving items from the 12% slab to 5% is projected to cause an annual revenue loss of around ₹80,000 crore for both the Centre and the states.

The move, first announced by Prime Minister Narendra Modi, could reportedly reduce GST on nearly 175 products, including processed foods, dry fruits such as almonds, packaged snacks, jams, ghee, butter, pickles, chutneys, murabba, as well as big-ticket items like automobiles, tractors, refrigerators, air conditioners, and other electronics.

But what happens if companies and producers of these goods do not pass on the benefits of these cuts to consumers? According to an earlier report by Business Standard, to prevent such a situation, the government is considering bringing back anti-profiteering provisions for a limited period.

The provisions, which set up the National Anti-Profiteering Authority (NAA) to regulate unfair profiteering practices by companies, were first introduced in 2017. However, after complaints from businesses and due to a sunset clause, they lapsed in 2025.

An official told BS on August 20 that the government is planning to reintroduce anti-profiteering measures for up to two years to ensure businesses do not pocket the benefits of lower rates.

What Were the Anti-Profiteering Provisions?

Anti-profiteering measures were introduced under Section 171 of the Central GST Act. They required businesses to pass on any benefit from a reduction in the GST rate or input tax credits to customers by lowering prices accordingly.

To enforce this, the Act required the central government to set up or empower an authority to examine whether businesses were reducing prices in line with tax benefits. If the authority found that a business had retained the benefit instead of passing it on (profiteering), it could impose a fine of 10% of the profiteered amount, unless the full amount was repaid within 30 days of the order. These provisions were in effect from July 1,2017.

The National Anti-Profiteering Authority (NAA) was set up on November 16, 2017 after a sharp reduction in GST rates to ensure consumers actually benefited from these cuts. It was a five-member body led by a Chairman at the rank of Secretary, supported by technical members and a secretary from the tax department. Under Rule 137 of the CGST Rules, it was initially meant to function for two years, but its tenure was extended.

Consumers could lodge complaints online, which were screened by jurisdiction. Valid cases were sent to the Directorate General of Safeguards for investigation, and if the NAA found that GST benefits were not passed on, it could order companies to refund the benefit to consumers or deposit the equivalent amount in the Consumer Welfare Fund.

Cases the NAA Dealt With

According to an earlier report by FACTLY, as of June 2019, out of 67 cases received, 26 were confirmed as profiteering, amounting to ₹600.51 crore. The NAA had issued 58 more orders after that period.

A 2020 report noted that the NAA issued several high-profile orders against major companies for not passing on GST rate-cut benefits to consumers. Like, Hindustan Unilever (HUL) was accused of increasing base prices and not passing on GST rate cuts, allegedly profiteering ₹383 crore (₹223 crore remained payable).

Jubilant FoodWorks (Domino’s) was found not to have reduced pizza prices despite GST dropping from 18% to 5%, profiteering ₹41.42 crore.

Abbott Healthcare was accused of raising the base price of its Melaglow Rich cream while tax rates fell, resulting in ₹96.59 lakh in undue gains.

McDonald’s franchisee Hardcastle Restaurants was charged with failing to pass on both GST cuts and input tax credit benefits, totalling ₹7.49 crore.

Patanjali Ayurveda was accused of increasing prices on products like washing powder and not transferring GST reduction benefits (from 28% to 18% and 18% to 12%), leading to profiteering of ₹75.08 crore.

How the NAA Became Dysfunctional

In 2022, through a notification, the government empowered the Competition Commission of India (CCI), acting on GST Council recommendations, to examine whether businesses were passing on tax benefits proportionately to consumers.

From December 2022, the CCI took over the NAA’s mandate.

A notification dated November 23, 2022 amended the CGST Rules, 2017, by omitting several rules (specifically Rules 122, 124, 125, 134, and 137) that governed the NAA’s structure, appointments, and functioning.

Later, in 2024, as the CCI stepped back from anti-profiteering actions, saying it was not its core function, the government transferred these powers to the Principal Bench of the GST Appellate Tribunal (GSTAT). A notification dated September 30 2024 effectively transferred the NAA’s functionality to the GSTAT.

Under the same notification, the government set a sunset date of April 1, 2025 for accepting new anti-profiteering examination requests. From that date, no fresh complaints under Section 171 would be entertained.

Why Is the NAA Needed Now?

According to Motilal Oswal Financial Services, the GST rate rationalisation exercise will only succeed if the rate cut is fully passed on to consumers.

In a note dated August 26 discussing how GST rationalisation could make cars cheaper, the brokerage warned that if OEMs absorbed part of the benefit (such as by reducing discounts), the full impact of the move would not be visible.

“Hence, it remains to be seen whether the government reinstates the anti-profiteering mandate, which has already expired, following the proposed GST rate cut,” the brokerage said.