Supreme Court Issues Notices Under GST Act On Constitutional Validity Of Anti-Profiteering Norms

Supreme Court Issues Notices Under GST Act On Constitutional Validity Of Anti-Profiteering Norms

The matter is listed for a hearing tomorrow

The Supreme Court has issued notices to the Ministry of Finance, the Central Board of Indirect Taxes and Customs (CBIC), the Goods and Services Tax Council (GSTC) and the National Anti-Profiteering Authority (NAA) subsumed under the Competition Commission of India (CCI), to respond to the constitutional validity claims of the anti-profiteering norms under the Goods and Services Tax Act.

The bench took cognizance of the Special Leave Petitions (SLPs) filed by real estate firms Swati Realty and Manas Developers challenging a Delhi High Court verdict, upholding the constitutional validity of the anti-profiteering provisions. The developers pointed out the high court’s failure on the impugned unconstitutional provisions.

Earlier, the court had decided on the constitutional validity of the anti-profiteering provisions and held the same valid. It was to decide on the absence of methodology, wherein businesses found it difficult to determine the quantum of profiteering. That’s because, in varied sectors, the NAA used different methods and mechanisms to compute profiteering.

Early this year, while the court upheld the provisions’ constitutional validity, it went in favor of the real estate sector. The order categorically mentioned that the methodology used by the NAA on the Input Tax Credit (ITC) ratios for the erstwhile and GST period, was inappropriate. On the anti-profiteering provisions, the court favored the Revenue Department.

Thereafter, the question arose whether the quantum of profiteering would be addressed by the high court or the lower authorities. The companies were offered to either be heard before the high court or get the quantum decided by the lower authorities.

The matter is slated to be heard tomorrow.

Meanwhile, the real estate players and FMCG approached the top court to be heard on the constitutional validity of the provisions. Hence, the notices.

While arguing for the petitioners, Abhishek A Rastogi, the founder of Rastogi Chambers stated, "We have been arguing before the Delhi High Court and the Supreme Court that the anti-profiteering provisions will have to test the constitutional validity in the absence of a specific methodology to determine the quantum of commensurate reduction in prices.”

“Accordingly, it is imperative that the constitutional validity aspect is decided by the Supreme Court, especially for the real estate players, where the findings of the Delhi High Court are tilted favorably towards the sector. This is predominantly on the methodology applied by the authorities to determine the quantum of profiteering for the sector," he added.

In February, the Supreme Court sent a notice to the Government of India on the same matter on a separate petition, as the NAA has been facing litigations at various levels of the judiciary.

The NAA was set up in November 2017 to ensure that companies pass on the ITC benefits and GST reduction to consumers on price reduction. Later, it was subsumed under the CCI, which, since December 2022, has been dealing with complaints of profiteering against companies.

In January, over 100 companies, including Hindustan Unilever, Patanjali, Jubilant Foodworks, and Phillips, filed petitions in the high court against the anti-profiteering provisions.

The court had held the provisions on a commensurate reduction in prices when GST rates were reduced or due to ITC. Hence, the provisions were in the public interest and in accordance with the legislative powers under the Constitution of India.