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

• The Delhi High Court on Monday upheld the constitutional validity of the anti-profiteering provisions under the Goods and Services Tax (GST) Act
• dealing a blow to more than 100 companies, including Hindustan Unilever, Nestle, Johnson & Johnson, Abbott, Patanjali and DLF

Key Highlights

• It had challenged the provisions as well as the penalty imposed by the National Anti-profiteering Authority (NAA).
• A bench of acting chief justice and Justice held that the GST law is a “consumer-centric” beneficial legislation that eliminates the levy of multiple taxes,
• Companies from diverse sectors such as hospitality, fast-moving consumer goods and real estate had challenged the NAA’s order imposing penalty
  • for failing to pass on the commensurate benefit of reduction in the rate of tax or input tax credit to their consumers with interest and the validity of various provisions under the GST law.
• There is no space for allowing the unfair retention of advantages resulting from a decrease in tax rates or the availability of input tax credit by the manufacturer, supplier, or distributor.
• The court clarified that the anti-profiteering provisions do not constitute a "price-fixing mechanism".
  • There cannot be a predetermined or mathematical formula established to ascertain profiteering.

Prelims Takeaway

• Input Tax Credit
• Goods and Service Tax (GST)