The Delhi High Court has held that under Section 171 of the Central Goods and Services Tax Act, 2017, an authority may order a business to reduce its prices following a GST rate cut applicable to its goods or services. In addition, in extreme cases, that authority can impose a penalty or even cancel the GST registration of defaulting businesses.
A division bench comprising Justices Prathiba M. Singh and Shail Jain made these observations while adjudicating a challenge to the constitutional validity of Section 171. The Court reaffirmed that the anti-profiteering regime seeks to ensure that the benefits arising from reduced taxes or enhanced input tax credit must reach consumers, and the institutional framework set up under Section 171 is empowered to enforce that objective.
The bench noted that if, after investigation, the authority confirms the need for anti-profiteering action, it may order:
a reduction in prices by the supplier,
return of undue benefit to consumers with interest,
deposit of such unclaimed amounts into the Consumer Welfare Fund, and
in extreme cases, imposition of penalty or cancellation of registration.
The Court also remarked that a pre-existing decision by a coordinate bench in Reckitt Benckiser India Pvt. Ltd. v. Union of India (2024) had upheld the constitutional validity of Section 171, recognizing it as a consumer-welfare measure aligned with the objectives of the GST system.
