Can a soap maker slip in extra grams instead of lowering prices? Can an automaker spread tax breaks across its lineup while concentrating benefits on a single marquee model? Or can a consumer durables company fold a festival discount into a tax cut and call it compliance?
These are not thought experiments. They are real questions corporate India is grappling with after the government trimmed Goods and Services Tax rates to boost demand. The move was meant to put more money in consumers’ pockets, but companies face a familiar headache: how to pass on the benefit without tripping over anti-profiteering rules.
“The purpose of anti-profiteering regulations is that the industry should not make a profit on account of GST cuts, and the benefit should be passed on to customers. Hence, probably, the ‘true spirit of the law’ is more important than the mechanics which are adopted to pass on the benefit,” said Pratik Jain, partner, Price Waterhouse & Co LLP.
Tax experts say regulators expect benefits to flow at the SKU (stock keeping unit) level, not spread across categories. That principle sparked a wave of litigation when GST was introduced in 2017, with disputes reaching consumer forums and high courts. The Supreme Court still hasn’t settled the matter, leaving companies exposed to another round of legal battles if they take aggressive positions.
Hybrid approaches, such as cutting prices for premium packs while adding grammage to entry-level ones, may hold up if records are airtight and the benefit is traceable. Lawyers recommend that businesses not only document every move but also publicise it, to reassure both regulators and consumers.
Shivam Mehta, Executive Partner at Lakshmikumaran & Sridharan Attorneys, said that although the Legal Metrology Department has issued a circular permitting businesses to declare a revised MRP alongside the existing MRP (maximum retail prices) on unsold stock held before the announced revision, the circular lacks clarity and certainty on the implementation and compliance of such a circular.
“The revised rates are set to take effect from 22nd September 2025, which leaves a very short window for companies to reissue labels, update prices and coordinate with distributors and retailers,” said Mehta. “This compressed timeline substantially reduces the ease of doing business, as it forces rushed and costly operational changes and exposes the businesses to the risk of challenge if authorities later conclude that the benefit was not adequately passed on,” he added.
Another grey area, according to the experts, is festival promotions. Bundling discounts with GST benefits could invite scrutiny, experts warn, arguing that separating the two is safer. Courts have consistently treated straightforward price cuts as the cleanest way to comply. Attempts to mask or fold benefits into offers could be challenged.
Timing adds another wrinkle. Industry practice assumes tax cuts should be reflected immediately and last until input costs change. Raising prices later is permissible, but only with evidence that higher costs justify the move.
What companies fear most is whether the government might revive a formal anti-profiteering body. While officials have signalled a shift to a trust-based framework, Section 171 of the CGST Act still gives them authority to clamp down.
“While the government has indicated a move away from strict anti-profiteering enforcement, Section 171 of the CGST Act remains in force. The government retains the power to issue notifications or bring in new regulations/frameworks if it observes widespread non-compliance or abuse of the trust-based regime,” said Jain.
"Suo motu action by authorities is still possible, even in the absence of consumer complaints. The government has publicly stated it will monitor trade practices and can take strict action if benefits are not passed on, including potentially reintroducing or strengthening anti-profiteering mechanisms,” added Jain.
These are not thought experiments. They are real questions corporate India is grappling with after the government trimmed Goods and Services Tax rates to boost demand. The move was meant to put more money in consumers’ pockets, but companies face a familiar headache: how to pass on the benefit without tripping over anti-profiteering rules.
“The purpose of anti-profiteering regulations is that the industry should not make a profit on account of GST cuts, and the benefit should be passed on to customers. Hence, probably, the ‘true spirit of the law’ is more important than the mechanics which are adopted to pass on the benefit,” said Pratik Jain, partner, Price Waterhouse & Co LLP.
Tax experts say regulators expect benefits to flow at the SKU (stock keeping unit) level, not spread across categories. That principle sparked a wave of litigation when GST was introduced in 2017, with disputes reaching consumer forums and high courts. The Supreme Court still hasn’t settled the matter, leaving companies exposed to another round of legal battles if they take aggressive positions.
Hybrid approaches, such as cutting prices for premium packs while adding grammage to entry-level ones, may hold up if records are airtight and the benefit is traceable. Lawyers recommend that businesses not only document every move but also publicise it, to reassure both regulators and consumers.
Shivam Mehta, Executive Partner at Lakshmikumaran & Sridharan Attorneys, said that although the Legal Metrology Department has issued a circular permitting businesses to declare a revised MRP alongside the existing MRP (maximum retail prices) on unsold stock held before the announced revision, the circular lacks clarity and certainty on the implementation and compliance of such a circular.
“The revised rates are set to take effect from 22nd September 2025, which leaves a very short window for companies to reissue labels, update prices and coordinate with distributors and retailers,” said Mehta. “This compressed timeline substantially reduces the ease of doing business, as it forces rushed and costly operational changes and exposes the businesses to the risk of challenge if authorities later conclude that the benefit was not adequately passed on,” he added.
Another grey area, according to the experts, is festival promotions. Bundling discounts with GST benefits could invite scrutiny, experts warn, arguing that separating the two is safer. Courts have consistently treated straightforward price cuts as the cleanest way to comply. Attempts to mask or fold benefits into offers could be challenged.
Timing adds another wrinkle. Industry practice assumes tax cuts should be reflected immediately and last until input costs change. Raising prices later is permissible, but only with evidence that higher costs justify the move.
What companies fear most is whether the government might revive a formal anti-profiteering body. While officials have signalled a shift to a trust-based framework, Section 171 of the CGST Act still gives them authority to clamp down.
“While the government has indicated a move away from strict anti-profiteering enforcement, Section 171 of the CGST Act remains in force. The government retains the power to issue notifications or bring in new regulations/frameworks if it observes widespread non-compliance or abuse of the trust-based regime,” said Jain.
"Suo motu action by authorities is still possible, even in the absence of consumer complaints. The government has publicly stated it will monitor trade practices and can take strict action if benefits are not passed on, including potentially reintroducing or strengthening anti-profiteering mechanisms,” added Jain.
You may also like
Second warning: Zohran Mamdani again pledges to arrest Netanyahu if elected; also targets Putin
Trump now puts onus on Nato to stop Russian oil imports
Germany focuses on India for strategic, technology and economic ties: Report
Children with disabilities inspire people at Vadodara Urban Innovation Summit
Sophie Kasaei and Jordan Brook reveal hopeful fertility update with powerful message
