GST 2.0 and the Ghost of Anti-Profiteering: Lessons from the recent ruling in the case of Wai Wai

By, 

Adv Sherry Samuel Oommen:

He specialises in the Constitution, tax and corporate laws and has also cleared the final exams of the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India and the Institute of Company Secretaries of India. He has also completed his Masters’s Degree in Commerce, apart from obtaining a Post Graduate Diploma in Business and Corporate Laws from Symbiosis, Pune. The views expressly are personal and should not be construed as a legal opinion.
sherryoommen@nashcp.com

India recently unveiled a major overhaul of its Goods and Services Tax (GST) framework, popularly termed “GST 2.0”. The reforms, driven by the 53rd and subsequent GST Council meetings, aim to rationalize the multi‑slab rate structure that has long been a source of classification disputes and compliance burdens. The old five‑rate structure (0%, 5%, 12%, 18%, 28%) has been pruned: the 12% and 28% slabs have been removed, and over 500 articles have seen rate reductions, with more than 52 items now enjoying full exemption. Effective from September 22, 2025, the rationalization covers both essential goods and industrial inputs, intended to smoothen the rate architecture and support the “Make in India” initiative.

Yet, as businesses adjust their pricing to reflect the new rates—whether by lowering prices, increasing quantities, or revising the MRP of unsold stock—a familiar and thorny question resurfaces: what happens to the benefit of a tax cut? The answer lies in India’s decade‑long experiment with anti‑profiteering provisions, a recent landmark ruling of the GST Appellate Tribunal against the maker of the well-known Wai Wai noodles [reported in TS-56-GSTAT(DEL)-2026-GST], and the evolving post‑amendment enforcement landscape.

1. India’s Experiment with Anti‑Profiteering Provisions under GST

When the GST was introduced in July 2017, it brought a significant reduction in the effective tax burden on a vast range of goods and services. To ensure that these benefits reached the end consumer—and were not pocketed by businesses—the Government inserted Section 171 into the Central Goods and Services Tax Act, 2017 (“the Act”). This provision mandated that any reduction in tax rate or benefit of input tax credit (ITC) must be passed on to the recipient by way of a commensurate reduction in prices.

A dedicated National Anti‑Profiteering Authority (NAA) was established to enforce the provision, supported by the Director General of Anti‑Profiteering (“DGAP”) as the investigative arm. From 2017 until its formal sunset, the anti‑profiteering mechanism remained perpetually disputed, primarily affecting fast‑moving consumer goods (“FMCG”) and construction companies.

1. Controversies and Challenges

The central controversy revolved around the lack of a consistent methodology. Neither the statute nor the rules prescribed a specific formula for quantifying how much benefit had to be passed on.  Enforcement often varied: in some cases, the DGAP compared prices at the SKU level; in others, it examined product‑line or entity‑level margins. This inconsistency created uncertainty, leaving businesses unable to accurately calculate the required price reduction and vulnerable to investigation.

Moreover, compliance costs escalated. Companies were required to maintain meticulous records of pricing strategies, cost inputs, and ITC accumulation—often without clear guidance on what documents would satisfy the authorities. Non‑compliance, even if unintentional, could lead to hefty penalties and interest demands.

• Judicial Scrutiny and the Sunset Date

The anti‑profiteering regime was challenged before various High Courts. In the landmark Reckitt Benckiser (India) Pvt. Ltd. v. Union of India (W.P.(C) 7743/2019)[1], the Delhi High Court laid down critical principles: while the NAA could examine whether a tax benefit was passed on, it had no authority to fix or control base prices arbitrarily. Suppliers remained free to revise prices based on commercial considerations, but any increase that offset a tax reduction had to be justified on a “cogent basis”—with contemporaneous evidence of cost escalations. The judgment also emphasized that due process and a transparent, consistent approach was a prerequisite.

After years of operation, the NAA was wound up in 2022, and its functions were transferred to the Competition Commission of India (CCI) and eventually to the GST Appellate Tribunal (GSTAT). Finally, the 53rd GST Council meeting held on June 22, 2024, recommended a sunset date for the anti‑profiteering provisions. Consequently, April 1, 2025, was prescribed as the date after which no new anti‑profiteering complaints could be filed under Section 171. The provision was thus formally sunsetted.

90. The Case of Wai Wai: C.G. Foods and the ₹9 Lakh Profiteering Finding[2]

Even though the anti‑profiteering mechanism is under a sunset clause, the legal legacy it created continues to shape expectations. A prime example is the recent ruling by the GST Appellate Tribunal, Delhi, in DG Anti‑Profiteering v. C.G. Foods [TS‑56‑GSTAT(DEL)‑2026‑GST], pronounced on February 3, 2026. The case arose from a rate reduction that occurred years earlier—yet its principles remain acutely relevant for the current GST 2.0 environment.

Background

On November 15, 2017, the GST Council reduced the rate on instant noodles (falling under HSN 1902) from 18% to 12% through Notification No. 41/2017‑Central Tax (Rate). The reduction was intended to benefit consumers. However, a complaint filed by the Assistant Commissioner (State Tax), Dispur, Assam, alleged that C.G. Foods, the manufacturer of “Wai Wai” noodles, had not passed on the benefit.

Investigation and DGAP Findings

The DGAP initiated an investigation covering the period from November 15, 2017, to December 31, 2018. The analysis was invoice‑wise: the average base prices of affected SKUs during the pre‑rate‑reduction period (November 1–14, 2017) were compared with the actual base prices charged after the rate cut.

The DGAP found that, despite the 6% reduction in GST, C.G. Foods had increased the base prices of several products. For example, the “Wai Wai Chicken Noodles Mimi 35g” saw its per‑unit base price rise from ₹202.38 to ₹212.12, resulting in a net profiteering of ₹10.91 per unit. Aggregated across all impacted SKUs, the total profiteering amounted to ₹90,90,310.

Defence and Rebuttal

C.G. Foods argued that the price revision was necessitated by contemporaneous increases in raw material costs (wheat flour, palm oil, spices), packaging, and freight. It claimed that the 6% GST reduction was only a marginal relief compared to input cost surges of 40–50%. The company also pointed out that it had not changed the MRP during the period and that it faced intense competition.

GSTAT’s Reasoning

The Tribunal rejected the defence on several grounds:

• No Cogent Basis: While acknowledging that suppliers are free to fix base prices, the Tribunal—relying on the Reckitt Benckiser precedent—held that any increase offsetting a tax reduction must be justified on a cogent basis. The cost increases cited by the respondent pertained largely to periods prior to the rate reduction and did not demonstrate that the entire 6% benefit was absorbed by contemporaneous escalations during the investigation period.
• Presumption Unrebutted: The presumption of profiteering under Section 171 remained unrebutted. The invoice‑wise comparison confirmed that base prices were raised immediately after the tax cut.
• Penalty and Interest: The Tribunal confirmed the profiteered amount but refrained from imposing interest or penalty. Interest under Rule 133(3) became effective only from June 28, 2019, and penalty under Section 171(3A) from January 1, 2020—both dates fell after the period of violation. Applying fiscal provisions retrospectively was held to be impermissible.

The Tribunal directed C.G. Foods to deposit the ₹90.9 lakh into the Consumer Welfare Fund, to be shared equally between the Centre and the States.

2. What Happened After the New Amendment: GST 2.0 and the Return of the Expectation

With the removal of the 12% and 28% slabs under GST 2.0, a fresh wave of rate rationalisation has taken effect from September 22, 2025. Businesses are now adjusting their prices, and the question of passing on benefits has resurfaced—but this time, the anti‑profiteering provision itself is no longer active.

No Formal Anti‑Profiteering, But No Blank Cheque

Although Section 171 has been sunsetted (with new complaints barred after April 1, 2025), the government has made it clear through other measures that profiteering from rate cuts is not expected to go unchecked.

1. Consumer Affairs Department’s MRP Revision Instructions
   In light of the rate rationalisation, the Department of Consumer Affairs allowed manufacturers to revise the MRP on unsold stock by stamping, affixing stickers, or online printing—provided the original MRP remains visible and the revised price does not obscure it. This permission is valid until December 31, 2025. The underlying message is that businesses are expected to reflect the benefit of rate reductions in final prices.
2. Invocation of the Consumer Protection Act, 2019
   The government has indicated that it may invoke the Consumer Protection Act, 2019, to ensure that tax benefits are passed on. Under that Act, consumers have a right to be informed about price changes, and unfair trade practices—including profiteering disguised as price adjustments—can be challenged. The Department of Pharmaceuticals issued similar instructions on September 12, 2025, underscoring the cross‑sectoral expectation.
3. Policy Expectation Remains – Even though the dedicated anti‑profiteering machinery has been dismantled, the policy intent behind Section 171 has not vanished. The 56th GST Council meeting further reduced the rate on items under HSN 1902 (instant noodles) to 5%, reinforcing the government’s commitment to passing on benefits. The absence of a formal mechanism does not give businesses a free pass; instead, it shifts enforcement to other legal frameworks and to public scrutiny.
4. Key Learnings from the Anti‑Profiteering Era for Businesses

The decade‑long anti‑profiteering experiment—culminating in cases like C.G. Foods—offers three enduring lessons for businesses navigating GST 2.0:

1. Consistent, Documented Methodology Matters
   The lack of a uniform formula was the Achilles’ heel of the old regime. Companies should now proactively adopt a consistent methodology for computing the benefit passed on—whether at SKU level, category level, or entity level—and document it meticulously. This avoids the ad‑hoc spreadsheets that often failed scrutiny.
2. Policy Expectation to Pass Through Rate Cuts Persists
   The sunset of Section 171 does not eliminate the policy expectation. The government has repeatedly signalled, through MRP revision permissions and references to the Consumer Protection Act, that consumers are entitled to the benefit of rate reductions. Businesses that ignore this expectation risk reputational damage, legal action, and possible penalties under other statutes.
3. Documentation Is the Best Defence
   What survived court scrutiny were contemporaneous records: how the benefit was calculated, what costs offset it, who approved pricing decisions, when MRPs were changed, and how customers were informed. Maintaining such an audit trail will be critical even in the absence of a dedicated anti‑profiteering authority.

• Key Considerations and the Way Forward

With GST 2.0 now effective, businesses should take proactive steps to manage both commercial and compliance risks:

• Revisit Contracts: Vendor and customer contracts should be reviewed to align pricing and tax clauses with the revised rate structure. Clear specifications on how tax benefits will be shared can prevent later disputes.
• Plan Procurement and Supply Chain: The revised rate structure may affect sourcing decisions, logistics costs, and inventory management. Dual‑rate transitional periods require careful planning to avoid unintended stock‑holding or pricing anomalies.
• Devise a Clear Policy for Old Stock: Companies must decide how pre‑reform stock will be priced, re‑labelled, and marketed once new rates take effect. Transparent communication with distributors, retailers, and consumers is essential.
• Formalise a Pass‑Through Methodology: Whether using SKU‑level comparisons or entity‑level margin analysis, a consistent, board‑approved methodology should be documented. This serves as the primary evidence of good faith.
• Strengthen MRP and Label Governance: Revised MRPs must be promptly reflected on packaging and promotional materials, with date‑stamped evidence of compliance with the Department of Consumer Affairs’ directions.

Conclusion

GST 2.0 represents a welcome simplification of India’s indirect tax landscape. The removal of the 12% and 28% slabs reduces complexity and aligns rates more closely with economic objectives. Yet, the ghost of anti‑profiteering continues to hover over the transition.

Although the formal mechanism under Section 171 has been sunsetted, the underlying principle—that the benefit of tax reductions should reach the ultimate consumer—remains firmly embedded in policy expectations and consumer protection laws. The Wai Wai case serves as a cautionary tale: even years after a rate cut, a failure to pass on benefits can lead to significant financial exposure and reputational damage, even if interest and penalty are not retrospectively applied.

Businesses would do well to view the current transition not as a regulatory vacuum, but as an environment where transparency, consistent documentation, and genuine pass‑through of benefits are the safest path forward. In the absence of a dedicated anti‑profiteering authority, the government appears prepared to deploy other tools—from consumer protection litigation to public disclosure requirements—to ensure that consumers are not short‑changed. Ultimately, the best defence against future disputes is a well‑documented, good‑faith effort to align pricing with the new GST structure.

[1] [2024] 158 taxmann.com 675

[2] NAPA/99/PB/2025/ [2026] 183 taxmann.com 241

Pic Courtesy: pegasus/ images are subject to copyright