A couple of days back, a headline in the Mint caught my attention: “Profiteering casts a cloud over GST cuts”.
The article suggests that long-overdue GST rate cuts and rationalisation might be delayed once again. Apparently, members of the GST Council and the government are concerned about “profiteering” – specifically, companies not passing on rate cuts to consumers.
At first glance, this appears reasonable and suggests that the government is rightly concerned about protecting hapless consumers.
I almost moved on, but something about the word profiteering made me pause. What do they mean by profiteering? And is this socialist throwback even relevant in the India of 2025?
According to Dictionary.com, profiteering is “the act or practice of seeking exorbitant profits, especially through the sale of scarce or rationed goods.”
This implies sellers taking advantage of abnormal scarcity to make abnormal profits. In plain terms: selling hand sanitiser at ₹1000 a bottle during the lockdown. We saw plenty of that during early COVID.
And lots more in pre-liberalisation India, when shortages were the norm. Back then, standing in line was a national sport. We queued up for everything — from Bajaj scooters to telephone connections to milk. The seller had the power to decide whether you or the next bloke got to jump the queue – for a premium, of course!
Maybe that’s why the idea of anti-profiteering took such strong root in India.
When GST was implemented in 2017, it came with an in-built National Anti-Profiteering Authority (NAA) – a temporary body meant to ensure businesses pass on tax rate cuts to consumers.
This was (and is) a noble and moral objective – to protect innocent customers from rapacious businessmen. It sends out clear signals that the government is pro-consumer and is doing its best to keep prices low.
But doesn’t it also send out the message that businesses are not to be trusted?
In the years that followed, hundreds of companies received notices. Some paid up, others lawyered up — all for a grand total of ₹2,000 crore in “ill-gotten gains”. That’s barely a bad quarter for one FMCG giant. And what’s a couple of hundred more cases for courts that have a backlog in the thousands?
In the end, all we’ve got is litigation and no benefit to the consumer. Why was this?
Because pricing is not algebra. It’s dynamic guesswork — affected by input costs, location, discounts, seasonality, competitor tantrums, and maybe the marketing head’s mood on a Monday morning. More often than not, the finance team does not know why the price is ₹77 and not ₹79.
Also, the law put the burden of proof on accused companies. Imagine defending the pricing of every soap bar, shampoo sachet, and chocolate in every store from Agartala to Ahmedabad. That’s not compliance — it’s data entry on steroids.
In short, this created a big mess. The NAA itself was disbanded in 2022, and cases were shifted to an already overburdened Competition Commission of India (CCI). Last year, the government announced that effective April 1, 2025, no more cases would be filed under the GST anti-profiteering law.
This was celebrated as a victory for less bureaucracy and “ease of doing business”.
But now, the bogey of anti-profiteering is raising its head again. Just shows how difficult it is to get socialism out of the DNA of our politicians and Babus!
The entire idea of anti-profiteering rests on the assumption that businesses are not to be trusted and are out to cheat common folk.
Maybe there are some (or many) who will take temporary advantage.
So what?
India is a market that suffers from brutal levels of competition. For everything that you sell, there is someone down the street willing to sell it for less. Only those with superior value propositions can afford to price higher. And they must work hard to ensure this advantage does not fray over time. Companies cannot really make excessive profits unless they have a monopoly or form cartels.
There are very few monopolies, and most of them are government companies.
Given that competitive forces are so strong, opportunities for unusually high profits get ironed out pretty soon, unless you’re willing to lose market share.
The experience of fifty years post-independence should have taught us that prices cannot be controlled by government diktat. We’ve tried it. We got shortages, corruption, black markets, and zero innovation.
The only way to curb profiteering is to ensure that we enable free and fair competition in all products and services.
Let Babus focus on reducing entry barriers by making it easier to do business rather than stressing about whether shampoo got 40 paise cheaper after a tax cut.
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