The government of India has declared that it will not revive the anti-profiteering provisions in Section 171 of the Goods and Services Tax (GST) Act, even as it introduces one of the largest tax rate reductions since the introduction of GST in 2017.
The move is despite fears that companies might not be passing on the gains from lower tax rates to customers. The government has already signaled a shift away from stringent anti-profiteering regulation by adopting a trust-based model.
Section 171 of the CGST Act, though, continues to be on the books, giving the government permission to issue notifications or introduce new rules if it sees large-scale non-compliance or misuse of the trust-based system.
The Centre had earlier deliberated on reinstating anti-profiteering provisions for a temporary two-year duration under the shift towards a restructured Goods and Services Tax (GST), popularly known as GST 2.0. The initiative was intended to ensure that companies transfer tax reductions to customers, as opposed to retaining the benefits.
This would have announced a potential return of a regulatory mechanism that was dissolved in 2022 and merged with the Competition Commission of India (CCI). These factors notwithstanding, the government has chosen not to resurrect the anti-profiteering regulations at this juncture.
Market-based pricing will be the norm, with the government keeping a watchful eye on the situation to ensure that consumers benefit from lower GST rates.
On the whole, while the government has the power to reinstate anti-profiteering laws if needed, it has, to date, decided not to do so. The success of this move will be contingent on whether businesses agree to pass on the benefits of tax reductions to consumers, and the government's ability to track down and prevent any cases of unjust profiteering.