Setback for HUL, Nestle, Patanjali and others as HC upholds anti-profiteering provisions under GST

In what could be termed as a setback for more than 50 top companies in India, the Delhi High Court on Monday upheld the constitutional validity of various provisions of the anti-profiteering provisions under the Goods and Services Tax (GST) framework. 

More than 50 top companies are against the Anti-profiteering mechanism under GST, which was introduced by the government to make sure that the companies pass on the benefits of lower tax rates to consumers. Hindustan Unilever, Abbott, Johnson & Johnson, Philips, Patanjali, Samsonite, Jubilant Foods, and Nestle are among those that dragged the indirect-tax department to court over anti-profiteering provisions under GST.

The HC said it is a consumer welfare measure in the public interest and does not violate any constitutional provisions. The levy of interest is within the rule-making power of the central government, it said.

"We have upheld the constitutional validity of section 171 (of CGST Act) as well as rules 122, 124, 126, 127, 129, 133 and 134 of the (CGST) rules of 2017," the court said.

The court stated that section 171 mandates that a tax foregone has to be passed on as commensurate reduction in price and it is a consumer welfare measure introduced in public interest.

The rules in question pertain to the establishment and functioning of the Anti-Profiteering Authority.