Delhi High Court Affirms Constitutional Validity Of GST Anti-Profiteering Provisions

The Delhi High Court bench, presided over by Acting Chief Justice Manmohan and Justice Dinesh Kumar Sharma, affirmed the constitutional validity of anti-profiteering provisions within the Goods and Services Tax Act on Monday.

Over 100 companies—including Hindustan Unilever Ltd., Patanjali Ayurved Ltd., Jubilant Foodworks Ltd. and Phillips India Ltd.—had lodged petitions challenging these provisions.

The court emphasised that Section 171 of the GST Act mandates passing on any tax reduction benefits to consumers in the form of a corresponding reduction in prices. This provision is seen as a consumer welfare measure introduced in the public interest.

The central government, based on GST Council recommendations, can establish an authority to assess compliance. This authority has defined powers to ensure adherence to the price reduction mandate.

Non-compliance may result in a penalty of 10% of the profiteered amount, though a timely deposit of the profiteered amount within 30 days can exempt the entity from penalties.

A detailed order is awaited.

While the Delhi High Court has upheld the constitutionality of these provisions, these companies may file an appeal in the Supreme Court against this verdict, said Gunjan Prabhakaran, partner at BDO India, in a media note.

The High Court judgement would also need to be analysed regarding their findings on various other legal issues, including the method of calculation of profiteering itself, she said.