The government has announced a major change in the Goods and Services Tax (GST) law. The rule that requires businesses to pass on the benefits of GST rate cuts to consumers is set to be abolished on April 1, 2025. This decision comes as part of an effort to simplify GST compliance and reduce the regulatory burden on businesses.
What Will Change from April 2025?
Currently, businesses must ensure that any reduction in GST rates is reflected in the prices of goods and services. This is meant to prevent companies from pocketing the benefits of lower GST rates, a practice known as profiteering. If a company does not comply, it faces penalties.
From April 1, 2025, this rule will no longer be in effect. Businesses will no longer be required by law to pass on GST rate cuts to consumers. Instead, they will have greater flexibility in setting their prices, based on market conditions. For consumers, this means that prices may not drop as quickly or at all when GST rates are reduced.
Pending Cases to Be Handled by GSTAT
In addition to scrapping the anti-profiteering law, the government has also announced a change in how existing profiteering cases will be handled. Until now, the Competition Commission of India (CCI) has been responsible for overseeing complaints about profiteering. However, from October 1, 2024, all pending cases will be transferred to the GST Appellate Tribunal (GSTAT).
This change is aimed at streamlining the process and ensuring that tax-related cases are handled by a specialized body. The GSTAT will now have the authority to decide on all pending profiteering cases until a resolution is reached.
Why Is the Government Making This Change?
The decision to remove the anti-profiteering rules is part of the government’s broader efforts to simplify GST regulations. By eliminating these rules, the government hopes to reduce the compliance burden on businesses and allow market forces to play a larger role in determining prices.
According to tax experts, this move will also help companies adjust their pricing strategies more dynamically. Businesses will have the freedom to respond to market demand, without being restricted by anti-profiteering checks. This could lead to more competitive pricing in some sectors, though it may also result in fewer direct price reductions for consumers when GST rates are lowered.
Impact on Businesses and Consumers
For businesses, the removal of anti-profiteering rules is likely to be seen as a positive step. It will give them greater control over their pricing strategies and reduce the risk of penalties for not passing on GST benefits. Companies will also save on compliance costs, as they will no longer need to prove that they have adjusted prices in line with GST rate cuts.
On the other hand, consumers may have mixed feelings about this change. Without the anti-profiteering rule, there is no guarantee that price reductions will be passed on when GST rates are cut. Prices may remain higher, even if businesses are benefiting from lower GST rates. This could be a disadvantage for consumers in sectors where price reductions would have otherwise been expected.
What Happens to Existing Complaints?
While new complaints about profiteering will no longer be accepted after April 1, 2025, any cases filed before this date will still be addressed. These complaints will be transferred to the Principal Bench of the GST Appellate Tribunal (GSTAT), which will handle all pending cases.
The government has made it clear that no new complaints related to profiteering will be accepted after the April 2025 deadline. However, existing cases will continue to be reviewed and decided upon, ensuring that any unresolved issues are addressed.
Expert Opinions on the Change
Rajat Mohan, Executive Director at Moore Singhi, believes that this change marks a significant shift in the way businesses operate under GST. “For the first time, companies will be free from the strict monitoring of anti-profiteering rules, allowing market forces to determine prices,” he said.
Sandeep Sehgal, Tax Partner at AKM Global, also welcomed the move, stating that it would improve efficiency by reducing the burden on the CCI. “Transferring cases to the GST Appellate Tribunal will ensure that tax-specific issues are handled more effectively,” he added.
As the April 2025 deadline approaches, businesses and consumers alike will need to adjust to a new pricing landscape. While businesses may enjoy more freedom, consumers will need to stay vigilant and compare prices to ensure they are getting the best value for their money.
