Delhi High Court rules that GST reductions must make products more affordable. Simply increasing product size without lowering prices violates consumer rights and defeats the purpose of tax cuts.
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NEW DELHI: The Delhi High Court has reinforced that reductions in GST rates are meant to benefit the end consumer directly and cannot be bypassed by simply increasing product quantity. A bench of Justices Prathiba M Singh and Shail Jain clarified that manufacturers and distributors must reflect tax benefits in actual price reductions, not in indirect ways.
The case arose when Sharma Trading Company, a distributor of Hindustan Unilever Limited, was challenged by the National Anti-Profiteering Authority (NAPA). After GST on Vaseline products was lowered, the distributor continued charging the same price but increased the product volume by 100 ml.
The Court rejected this justification, stating that increasing quantity cannot replace lowering the price. The consumer must receive the benefit in the form intended by the GST reduction.
Court’s Observations
The bench noted:
“The purpose of reduction in GST is to make products more affordable for consumers. Keeping the price the same and only increasing quantity defeats this purpose, even if the consumer does not request extra quantity.”
Referring to the earlier Reckitt Benckiser India Pvt. Ltd. v. Union of India (2024) ruling, the Court highlighted:
“Supplying additional free material or increasing volume cannot fulfill the legislative requirement of passing on tax benefits to consumers. The reduction must be visible in actual prices.”
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While the Court acknowledged that pre-printed stock and logistical challenges might pose difficulties, it insisted that:
“Manufacturers and retailers must be ready to adjust. Products may temporarily sell below MRP, but the reduced GST must be passed on to the consumer.”
The bench criticized the practice of raising product quantity without lowering price as deceptive:
“This limits consumer choice. Non-reduction of price cannot be justified by increased quantity or promotional schemes. Such tactics undermine the purpose of GST rate reductions.”
