Govt looks to make sure GST cuts passed on soon

Mechanism to check profiteering by firms may be brought back

- Rajeev Jayaswal

The government may reactivate an anti-profiteering mechanism alongside next month’s expected Goods and Services Tax (GST) rate rationalisation to ensure businesses immediately pass on the benefits of lower GST rates to consumers, people familiar with the matter said.

The move comes as the GST Council prepares to meet on September 3-4 in New Delhi to discuss the Centre's proposal to slash tax slabs from four to two, potentially making everyday items significantly cheaper ahead of the festive season.

There is a pressing need to reinstate oversight mechanisms because the proposed changes would see 99% of items currently taxed at 12% move to the 5% bracket, while 90% of goods in the 28% slab would shift to 18%—creating substantial scope for businesses to pocket savings rather than reduce prices, the people said.

The GST law already provides legal framework for such enforcement through Section 171 of the CGST Act 2017, which allows the central government, on recommendations of the GST Council, to authorise any existing authority to examine whether tax cuts result in commensurate price reductions, the people added.

“The main purpose of rate rationalisation is to provide tax relief to the common man right from this festive season,” said MS Mani, partner at Deloitte India.