Pricing Discipline And Market Transparency

1. Introduction – Rationalization with a Purpose

India's latest phase of tax reform, popularly called GST 2.0, marks one of the most ambitious recalibrations of indirect taxation since 2017. Effective 22 September 2025, the Government revised rates on a wide range of goods and services with the express objective of lowering prices, curbing inflation, and enhancing consumer welfare. The reform's underlying economic logic is straightforward: if tax-induced price reductions are passed on, consumer purchasing power will increase, demand will expand, and industry will benefit from higher volumes.
In principle, every participant in the supply chain, including manufacturers, importers, distributors, retailers, and e-commerce intermediaries, is expected to align MRPs with the new GST rates so that the ultimate benefit flows to consumers. Complaints are mounting, enforcement remains fragmented, and the industry faces genuine operational hurdles in complying within the transition window.

2. Challenges in Achieving the Objective

Manufacturers, distributors, and retailers are expected to pass on the GST rate reduction to consumers by lowering prices. However, practical challenges have emerged, particularly relating to old inventory. For example, products already manufactured before the rate reduction may not be eligible for input tax credit (ITC) if the GST rate is lowered to, effectively converting recoverable taxes into sunk costs. This financial reality makes complete price reduction difficult for businesses. Additionally, during the transition period, some stakeholders may resist compliance due to operational burdens, system limitations, or perceived losses, further complicating the government's objective of ensuring direct consumer benefit.

3. Complaint Patterns and Enforcement Gaps

Thousands of complaints have poured into the National Consumer Helpline since the new rates took effect. Most allege that sellers, particularly on e-commerce platforms, failed to reduce prices or continued to display pre-revision MRPs. Retail chains, on the other hand, cite the practical difficulty of reconciling shelf labels, billing systems, and packaging templates across hundreds of SKUs (Stock Keeping Units) within days of the notification.
Under the Consumer Protection Act, 2019, formal complaints can be filed only by a "consumer" or a recognized association, meaning the government cannot directly initiate action against non-compliant entities. It can only act through statutory regulators or Suo-motu inquiries. This procedural limitation has led to a situation in which individual grievances trigger systemic investigations, but large-scale deterrence remains weak. Further complicating enforcement is the evidentiary burden, as each case demands correlation of invoice dates, GST applicability, and proof of profiteering, a task made arduous by complex supply chains and multiple intermediaries. Many complaints lack invoices altogether, slowing verification. As a result, despite receiving around 3,000–4,000 complaints per week, only a fraction translates into enforceable findings.

4. The Legal Metrology Framework: Clarifications and Confusions

To address industry anxiety about compliance timelines, the Ministry of Consumer Affairs issued two circulars under Rule 33 of the Legal Metrology (Packaged Commodities) Rules, 2011. The advisory dated 18 September 2025 clarified that manufacturers, packers, and importers could voluntarily affix revised price stickers on unsold pre-GST revision stock. The circular explicitly waived the requirement of publishing revised prices in two newspapers and allowed pre-packaged stock or unused packaging material to be used until 31 March 2026, provided corrections to retail sale prices were made. Importantly, the declaration of revised prices was voluntary, giving businesses operational flexibility while reinforcing the statutory expectation that the benefits of GST reduction must reach the consumer. This regulatory guidance illustrates the balance between easing procedural compliance for businesses and maintaining pricing discipline for consumer welfare.

5. Practical Dilemmas in Implementation

Beyond compliance formalities, companies face deeper economic challenges. Certain goods, particularly household and religious products, whose GST rates have been reduced to 0%, lose ITC eligibility, turning previously recoverable taxes into sunk costs. For businesses, this makes complete price reduction financially unviable. The handling of old inventory adds another layer of complexity, as pre-September stock cannot easily absorb cost differentials. Although the government's relaxation until March 2026 provides temporary relief, valuation distortions between pre- and post-revision goods remain unresolved. Retailers, meanwhile, risk consumer backlash for price discrepancies despite acting in good faith.
Moreover, Section 171 lacks a defined formula for computing "commensurate reduction," leaving enforcement bodies with broad discretion, often resulting in prolonged litigation. In the absence of clear guidelines, honest pricing errors may be construed as profiteering, chilling legitimate business activity.

Repression and Government Recourse (Sunset Clause of Section 171)

Section 171 remains applicable only until 31 March 2025. After this date, complaints relating to profiteering will no longer be entertained under the GST framework.
With this Sunset Clause effective from 1 April 2025, the government has notified this date as the conclusion of the anti-profiteering provisions under GST. Accordingly, the authority will not accept any new complaints or initiate investigations regarding profiteering.
However, existing complaints filed before 1 April 2025 will continue to be adjudicated by the Principal Bench of the GST Appellate Tribunal (GSTAT), which assumed jurisdiction from the Competition Commission of India (CCI) effective 1 October 2024.
This transition underscores the GST Council's intent to simplify compliance and enable market forces to determine pricing in the post-transition period.

6. The Government's Enforcement Dilemma

The state faces both procedural and evidentiary constraints. It cannot itself be the complainant under the Consumer Protection Act, and proving profiteering in fragmented value chains is challenging. While the Director-General of Anti-Profiteering (DGAP) continues to examine hundreds of cases, its mandate is largely reactive. The sunset of the National Anti-Profiteering Authority (NAA) earlier this year further diluted central oversight, leaving enforcement to state tax departments with varying capacities. The outcome is a patchwork of Suo-motu notices, particularly for e-commerce firms, with limited resolution on the ground.

7. Towards Solutions: A Compliance & Advisory Blueprint

Navigating this transitional turbulence demands both legal foresight and operational discipline. Businesses are advised to maintain structured pricing records, implement centralised complaint-response systems, integrate digital traceability across channels, engage proactively with regulators, revisit pricing and ITC strategies, and adopt transparent consumer communication. Additionally, continued dialogue between industry and government can help standardize computation of "commensurate benefit" and treatment of zero-rated inputs, reducing ambiguity.

8. Conclusion – From Compliance to Confidence

GST 2.0 is not merely a fiscal reform; it is an exercise in trust building between business and consumers. Its success depends less on punitive enforcement and more on credible compliance mechanisms. The Delhi High Court judgment in Sharma Trading and the Ministry of Consumer Affairs' Legal Metrology circular of 18 September 2025 illustrate that both judicial and regulatory frameworks emphasize direct price benefit to consumers while accommodating operational realities for businesses. For companies, the transition is an opportunity to institutionalize pricing transparency through data-backed justifications, prompt grievance redressal, and clear communication. Those who align early by blending regulatory prudence with consumer empathy will emerge as leaders in India's evolving market of responsible capitalism.

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