The Supreme Court has requested responses from the Centre and other parties regarding a petition that contests the ruling of the Delhi High Court. This decision upheld the legality of a section in the Central Goods and Services Tax (CGST) Act, which requires companies to pass on tax savings to consumers by lowering prices.
The Supreme Court of India has issued a notice to the Union Government, challenging the constitutional validity of the anti-profiteering provisions under the Goods and Services Tax (GST) regime. This move marks a significant moment in the ongoing discourse surrounding GST implementation and its impact on businesses and consumers across the country.
A three-judge bench, led by Chief Justice D.Y. Chandrachud, along with Justices J.B. Pardiwala and Manoj Misra, is deliberating on a special leave petition filed against a Delhi High Court order. The High Court had previously upheld the constitutional validity of these contentious provisions, sparking a debate on their implications for the business landscape in India.
The petitioner, Excel Rasayan Private Ltd, a detergent manufacturer, has raised concerns that the High Court failed to recognize that the impugned provisions are ultra vires, or beyond the powers granted by the Constitution. This case, being the first of its kind against the High Court order in the Supreme Court, is expected to pave the way for many other companies to come forward with similar grievances.
Counsel for the petitioner, Abhishek Rastogi, founder of Rastogi Chambers, has articulated that the indefinite time limit associated with the anti-profiteering provisions poses significant challenges for businesses, potentially leading to a state of uncertainty and complexity in compliance.
The National Anti-Profiteering Authority (NAA), established in November 2017, sits at the heart of this legal battle. The NAA’s mandate is to ensure that businesses pass on the benefits of input tax credits and reductions in GST rates to consumers through price reductions. This mechanism was introduced to mitigate the inflationary pressures observed in other countries following the implementation of GST, aiming to prevent undue profit-making at the expense of consumers.
However, the absence of a clear methodology for determining what constitutes profiteering has been a point of contention. Rastogi argues that without a defined formula, the anti-profiteering provisions are arbitrary and vague, leading to potential misuse and ambiguity in enforcement. The Delhi High Court, in its ruling, stated that it is not feasible to establish a fixed or mathematical formula for this purpose, a decision that has been met with criticism from various quarters.
The issue has garnered widespread attention, with over 100 companies, including giants like Hindustan Unilever, Patanjali, Jubilant Foodworks, and Phillips, filing petitions against the anti-profiteering provisions in the High Court. These companies argue that the provisions, while intended to protect consumer interests, may inadvertently stifle business operations and innovation due to their indeterminate nature.
The Supreme Court’s decision to issue a notice to the Central Government is a critical step towards resolving this legal quandary. It underscores the need for a balanced approach that safeguards consumer interests without placing undue burdens on businesses. As the case progresses, it will be closely watched for its potential to influence the GST framework and its enforcement mechanisms, shaping the future of India’s economic and legal landscape.
