GST Tax Cuts on Hold: Profiteering Concerns Loom Large

The GST Council is cautious about implementing new tax cuts due to fears that businesses might pocket the savings instead of passing them on to consumers. Past instances of real estate, multiplex, and consumer goods companies raising prices despite tax cuts have led to this caution.

GstTax CutsProfiteeringConsumer BenefitsInsurance PremiumsReal EstateAug 04, 2025

GST Tax Cuts on Hold: Profiteering Concerns Loom Large

Real Estate:The spectre of profiteering is holding back a new round of tax cuts, as the federal council for indirect taxes fears businesses will pocket the savings instead of passing them on. At stake is lower taxes on insurance premiums and an end to the 12% GST slab, two proposals that have gained broad support in recent times.

The caution stems from the previous experience of some real estate, multiplex, and consumer goods companies raising prices when taxes were cut, denying benefit to the consumer. The national anti-profiteering body formed as an interim measure to check such practices was wound up in November 2022, and no suitable alternative is in place yet.

“The ways of ensuring that businesses pass on the benefit of tax cuts to the consumer will get built into any decision on further lowering taxes. The council will ensure that the benefit will be passed on to consumers, or there will be no tax cut. If businesses cannot ensure that the tax relief meant for the consumer is passed on to them, why should the exchequer sacrifice revenue that could be used for welfare and development?” said one of the persons quoted above, who spoke on condition of anonymity.

Queries emailed to the finance ministry and the GST Council Secretariat on Friday seeking comments remained unanswered.

The standoff highlights a key challenge for the council: balancing the desire for economic stimulus and consumer relief with the need to prevent companies from undermining the policy's intent. While some experts believe market competition will force businesses to pass on the benefits, the council remains cautious, with state ministers previously voicing concerns.

The GST Council is keen on reducing tax rates on life and health insurance, and shifting many products in the 12% slab to 5% under a tax rate rationalization drive. The concerns on profiteering have come up in previous GST Council meetings and if they persist, the council is unlikely to go ahead with the proposed tax cuts, the two people said.

“Members of the GST Council from all states are very sensitive to this issue and some have aired their concerns at meetings in the past,” the person cited earlier said, adding discussions are on at the level of political leaders, and a final proposal is yet to be crystalized.

Kerala finance minister K.N. Balagopal and Uttar Pradesh finance minister Suresh Kumar Khanna have discussed concerns around profiteering with the GST Council chairperson and union finance minister Nirmala Sitharaman in recent council meetings, as per publicly available information about the meetings.

The concern is that an increase in the base price of products, which companies are free to revise in a free market economy, cancels the benefit to the consumer from a tax rate cut. In the past, the National Anti-profiteering Authority (NAA) has investigated several high-profile cases, involving Hindustan Unilever, Indiabulls Real Estate, and Patanjali Ayurved.

Experts believe efficient markets will ensure that companies compete in terms of price and quality to retain their market share. “Majority of the products in the 12% slab are consumer products and consumers are very price-sensitive. Market forces play a key role in making sure that businesses transfer the benefits of tax rate reduction to consumers,” said MS Mani, partner, indirect taxes, Deloitte India.

Worries about GST profiteering have surfaced as anti-profiteering measures have been gradually wound down as the indirect tax regime stabilized over the last eight years.

The National Anti-profiteering Authority (NAA), which was set up as a transitional arrangement to ensure that businesses passed on the benefit of tax credits available to them in the GST system and the benefit of tax rate cuts to the consumer, functioned for five years till November 2022, after which the mandate was given to the Competition Commission of India (CCI) but the anti-trust body could not handle it as its was designed as a regulator of market competition and efficiency rather than pricing.

Subsequently, the principal bench of the GST Appellate Tribunal (GSTAT) was entrusted to adjudicate on GST-related profiteering disputes. Given that NAA was set up to deal with profiteering concerns during the monumental transition into a new tax regime in 2017 and the number of complaints had eventually fallen drastically as the tax system stabilized, the government introduced a sunset clause to examine fresh complaints, effective from 1 April 2025.

But GSTAT will continue to adjudicate on disputes and offers a window to look into complaints. Besides, the council is empowered to introduce any fresh arrangement to ensure that profiteering concerns are addressed effectively, said a second person, who also spoke on condition of not being named.

The Council has been deliberating on proposals to reduce the 18% tax paid on life insurance premium and certain health insurance premium or to fully exempt them as part of efforts to give tax relief to consumers and to enhance access to insurance protection.

Separately, the Council has also been discussing simplification of the GST structure, which would entail shifting many of the goods in the 12% slab to 5% slab and some to the 28% where necessary. The shifting of mass-use products to a lower slab is also expected to deliver a consumption stimulus to the economy at a time global trade uncertainties remain high.

The GST Council is expected to meet this month, after the end of the Parliament's monsoon session, or next month. The date and agenda are yet to be finalized, a third person, who also spoke on condition of anonymity, said.

Frequently Asked Questions

What are the main concerns about GST tax cuts?

The main concern is that businesses might pocket the savings from tax cuts instead of passing them on to consumers, as seen in past instances where companies raised prices after tax reductions.

What is the role of the National Anti-profiteering Authority (NAA)?

The NAA was set up to ensure that businesses passed on the benefits of tax credits and tax rate cuts to consumers. It functioned for five years until November 2022.

What are the proposed changes to the GST slab rates?

The GST Council is considering reducing the 18% tax on life and health insurance premiums and shifting many products in the 12% slab to the 5% slab to provide tax relief and stimulate consumption.

How does the GST Council plan to address profiteering concerns?

The GST Council is working on ensuring mechanisms that businesses pass on the benefits of tax cuts to consumers. If this cannot be guaranteed, the council may not proceed with the tax cuts.

When is the next GST Council meeting expected?

The next GST Council meeting is expected to take place this month, after the end of the Parliament's monsoon session, or next month. The exact date and agenda are yet to be finalized.