Delhi HC to hear 51 petitions against anti-profiteering law under GST

Delhi High Court on Monday will hear 51 petitions challenging the constitutional validity of anti-profiteering regulations under the Goods and Services Tax (GST) law.

The petitions, filed by companies like Hindustan Unilever, Jubilant Foodworks, Abbott, Nestle, Whirlpool, IFB, Johnson & Johnson (J&J), etc, seek to first address the question on the constitutional validity of the anti-profiteering law in absence of any methodology to calculate profiteering. The court would also look at the legality and interpretation of Section 171 CGST Act.

According to Section 171 of the CGST Act 2017, suppliers of goods and services should pass the benefit of any reduction in the rate of tax or the benefit of input tax credit to the recipients by way of commensurate reduction in prices.

The court will also look into, apart from other rules, the legality of powers given to the National Anti-profiteering Authority to determine the methodology and procedure for a determination as to whether the reduction in the rate of tax on the supply of goods or services or the benefit of the input tax credit has been passed on by the registered person to the recipient by way of commensurate reduction in prices.  

"The first bridge would be to cross the question of constitutional validity in the absence of methodology. In case the court decides that these provisions are unconstitutional, the story ends and all demands will have to be dropped else the next step of determining the quantum of profiteering for each of the petition would come into play", said Abhishek Rastogi, partner at Khaitan & Co, who is arguing plethora of these petitions.

The petitioners have raised multiple issues related to the anti-profiteering. In an earlier hearing, the High Court had asked the lawyers of the petitioners to arrive at a consensus on the issues to be heard by the court. However, the petitioners could not arrive at a consensus and their lawyers submitted that there are around 48 issues that need resolution by the court.

Now, the court has decided that each party will argue as it deems appropriate and the Court will pronounce its verdict in accordance with the law.

Mekhla Anand, partner, indirect taxation, Cyril Amarchand Mangakdas, says that the issues involved have tremendous ramifications -- the methodology and procedure being used by the NAA does not have an economic basis. "So, the question is whether it has the power to levy penalty," she says.

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