Consumers should see price drop, not subtle product adjustments: Delhi HC on GST cut
A bench made it clear that keeping prices unchanged while increasing the quantity or running a promotional scheme doesn't pass on the real benefit of tax cut.
Consumers should see a direct drop in prices when Goods and Services Tax rates are reduced, and not be shortchanged through subtle product adjustments, the Delhi high court has ruled.
A bench of justices Prathiba M Singh and Shail Jain, in a ruling delivered on September 23, made it clear that keeping prices unchanged while merely increasing the quantity or running a promotional scheme does not pass on the real benefit of the tax cut.
The court, in its verdict released on Friday, emphasised that the very purpose of reducing GST rates is to make goods and services more affordable for buyers. Such practices frustrate the intent of the cuts, amount to deception and curtail consumer choice. The ruling assumes significance in the wake of the GST council’s major overhaul of the tax structure effective September 22, 2025, moving from a multi-slab system to primarily two rates, 5% and 18%, and a 40% rate for luxury/sin goods. To be sure, the case relates to an earlier reduction in GST rates.
“The purpose of the reduction in GST is to make products and services more cost-effective for the consumers. The said purpose would be defeated if the price is kept the same and some unknown quantity is increased in the product, even without the consumer requesting the increased quantity product. In the opinion of this court, the rationale behind the reduction in GST rates is also to ensure that the consumer gets the benefit of the said reduction,” the court emphasised in the ruling authored by Justice Singh.
It added, “... to ensure that the GST benefit is not passed on, increasing the quantity of the product unknowingly and charging the same MRP is nothing but deception. The consumer’s choice is being curtailed. The non-reduction of price cannot be sought to be justified on the ground that the quantity has been increased or that there was some scheme which justifies the price increase. In the opinion of this Court, such an approach would defeat the entire purpose of the reduction of GST rates and the same cannot be permitted.”
The court was dealing with a petition filed by M/S Sharma Trading Company, a firm engaged in the business of the sale of goods as a distributor of M/S Hindustan Unilever Limited, challenging the National Anti-Profiteering Authority’s (NAPA) September 2018 order. To be sure, NAPA, originally notified under the Central Goods and Services Tax Rules 2017, was substituted by the Competition Commission of India in November 2022.
In its order, NAPA held the firm guilty of profiteering for failing to pass on the benefits of GST rate cuts and directed the firm to deposit ₹5,50,186 into the consumer welfare fund, along with 18% interest, for profiteering.
The firm had continued charging 28% GST on the sale of Vaseline even after the tax was reduced to 18% in 2017, and instead of passing on the benefit to consumers, it increased the base price by ₹14.11 per unit and also its quantity by 100ml. The court upheld NAPA’s order.
