GST-related anti-profiteering regime to end in March next year, marking shift towards free pricing

The regulatory regime against businesses pocketing the benefit of reductions in the goods and services tax rates meant for consumers will end in March next year, the Central Board of Indirect Taxes and Customs (CBIC) said in an order, marking a shift towards market-determined pricing. 

From 1 April 2025, the authority designated to look into complaints of profiteering will not accept new requests to examine whether tax credits availed by a business or rate cuts have resulted in a commensurate reduction in the prices of goods or services sold by an entity, CBIC said.

This will end the anti-profiteering regime that was intended as a transitional arrangement when indirect tax reforms were introduced in July 2017.

The phasing out of the anti-profiteering regime signals that GST rates have more or less stabilised and the oversight of prices is no longer required. The regime was regarded as a weak regulation in a free-market economy as the government was not in a position to control prices and could only mandate that the benefit of tax relief should be passed on to consumers.

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Since there is no lock-in period for businesses to maintain any reduced price in the wake of a tax rate cut, businesses were free to raise prices after a while, citing increases in the cost of production.

Real estate developers, multiplexes, fast-food joints and fast-moving consumer goods were among the sectors that faced a large number of complaints related to profiteering, prompting investigation by the authorities.

Simplification of compliance

In many cases, businesses were asked to either return the alleged profiteered amount to the consumer or to deposit it with designated consumer welfare funds. Where consumers could be identified, for example in a housing project, the developers concerned were asked to return the profiteered amounts to them. 

Businesses had also contested the constitutional validity of the anti-profiteering provision in court and the matter is sub-judice.

CBIC issued another order transferring the mandate of adjudicating complaints of profiteering from the Competition Commission of India to the Principal Bench of the GST Appellate Tribunal from 1 October till the end of March next year. The commission, which has handled these cases since 2022, was given the mandate when the term of the National Anti-Profiteering Authority ended.

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The intent of the deregulation seems to be simplification of GST compliance by narrowing the window for anti-profiteering scrutiny, according to Rajat Mohan, executive director at accounting and advisory firm Moore Singhi. However, it is important to note that ongoing complaints and investigations as of the cutoff date will continue until they reach a final conclusion, he said.

“This deadline marks a significant transition phase for businesses, the government and consumers, as—for the first time since the introduction of GST—market forces will largely determine prices, free from the oversight of anti-profiteering regulations,” said Mohan. 

From 1 April 2025, businesses will have the autonomy to set prices for goods and services without the constraints of anti-profiteering regulations. This deregulation will usher in a more dynamic pricing environment, allowing businesses greater flexibility to adjust their pricing strategies in response to market demands, explained Mohan.

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