ANTI-PROFITEERING MEASURE [SECTION 171 OF THE CGST ACT, 2017] - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

28. ANTI-PROFITEERING MEASURE [SECTION 171 OF THE CGST ACT, 2017] 28.1. The burden of indirect taxation ultimately falls on the consumers. In GST regime there is an increased flow of input tax credit due to multiple stages involved in supplies. In such a scenario, the concern that benefit of such increased input tax credit may not be passed on by certain entities to the consumers is not justified. 28.2. Section 171 of CGST Act, 2017 makes it mandatory that any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. 28.3. National Anti-profiteering Authority has been constituted by the Central Government to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods and/or services supplied by him. 28.4. As per Notification No. 19/2024-Central Tax, dated 30.09.2024, 1st day of April 2025 is the appointed date from which the Authority shall not accept any request for examination as to whether input tax credits availed by a registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods and/or services supplied by that person. 28.5. The duty of the National Anti-profiteering Authority shall be: to determine whether the reduction in tax rate or the benefit of input tax credit has been passed on by the seller to the buyer (hereinafter collectively referred to as benefit ) by reducing the prices; to identify the taxpayer who has not passed on the benefit; to order- reduction in prices; return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest @ 18% from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Consumer Welfare Fund; imposition of penalty; cancellation of registration; to furnish a performance report to the GST Council every quarter. 28.6. All applications from interested parties on issues of local nature or those forwarded by Standing Committee shall first be examined by the State Level Screening Committee. On being satisfied that the supplier has not passed on the benefit, the Screening Committee within 2 months from the date of receipt of a written application, further extendable up to one month for reasons to be recorded in writing as may be allowed by the Authority, will forward the application with its recommendations to the Standing Committee on Anti-profiteering. 28.7. If the Standing Committee is satisfied that there is a prima facie evidence to show that the supplier has not passed on the benefit, it shall refer the matter to the Director General of Anti-Profiteering (DGAP) for a detailed investigation within 2 months from the date of receipt of a written application (further extendable up to 1 month for reasons to be recorded in writing as may be allowed by the Authority). 28.8. The Directorate General of Anti Profiteering (DGAP) shall conduct investigation and collect evidence necessary to determine undue profiteering and before initiation of the investigation, issue a notice to the interested parties and to such other persons as deemed fit for a fair enquiry into the matter. 28.9. The evidence or information presented to the DGAP by one interested party can be made available to the other interested parties, participating in the proceedings. The evidence provided will be kept confidential and the provisions of Section 11 of the Right to Information Act, 2005, shall apply mutatis mutandis to the disclosure of any information which is provided on a confidential basis. 28.10. The DGAP can seek opinion of any other agency or statutory authorities in the discharge of his duties. The Authority, DGAP, or an officer authorised by him will have the power to summon any person either to give evidence or to produce a document or any other thing. He will also have same powers as that of a Civil Court and every such inquiry will be deemed to be a judicial proceeding. 28.11. The DGAP will complete the investigation within a period of 6 months or within such extended period not exceeding a further period of 3 months for reasons to be recorded in writing as allowed by the Authority. Upon completion of the investigation, the DGAP will furnish to the Authority, a report of its findings along with the relevant records. 28.12. If the Authority finds that a registered person has not passed on the benefit, the Authority may order: reduction in prices; return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest @ 18% from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be; deposit an amount equivalent to 50% of the amount determined under the above clause along with interest @ 18% from the date of collection of the higher amount till the date of deposit of such amount in the Consumer Welfare Fund of Centre and the remaining 50% of the amount in the Consumer Welfare Fund of the concerned State, where the eligible person does not claim return of the amount or is not identifiable; imposition of penalty as specified under the Act; and cancellation of registration under the Act. 28.13. If the report of the DGAP recommends that there is contravention or even non-contravention of the provisions of Section 171 of the CGST Act, 2017 or these rules, but the Authority is of the opinion that further investigation or inquiry is called for in the matter, it may, for reasons to be recorded in writing, refer the matter to the DGAP to cause further investigation or inquiry in accordance with the provisions of the Act and these rules. 28.14. Upon receipt of the report of the DGAP, the Authority has reasons to believe that there has been contravention of the provisions of Section 171 of the CGST Act, 2017, in respect of goods and/or services other than those covered in the said report, it may, for reasons to be recorded in writing, within a period of six months, direct the DGAP to cause investigation or inquiry with regard to such other goods and/or services. Such investigation or enquiry shall be deemed to be a new investigation or enquiry and all the provisions of Rule 129 of the CGST Rules, 2017, shall mutatis mutandis apply to such investigation or enquiry. 28.15. The following points are relevant in this regard: Any order passed by the Authority shall be immediately complied with by the registered person failing which action shall be initiated to recover the amount. The Authority will pass order within 6 months from the date of the receipt of the report from the DGAP. An opportunity of being heard will be given, if the interested parties request for it in writing. Authority can now seek a clarification from DGAP on the Investigation report submitted by it during the process of determining as to whether the benefit has been passed on to the recipient by way of commensurate reduction in prices. Period of interest will be calculated from the date of collection of higher amount till the date of return of such amount. If the eligible person (i.e. the buyer) does not claim the return of the amount or the person is unidentifiable then the amount must be deposited to the Consumer Welfare Fund along with applicable interest. A registered person who is found to have profiteered is liable to pay a penalty of 10% of such profiteered amount if the profiteered amount is not deposited within 30 days of the date of passing of the order by the Authority. 28.16. Central Government, vide Notification No. 23/2022-CT dt. 23.11.2022 has empowered the Competition Commission of India (CCI) established under Section 7(1) of the Competition Act, 2002, to handle Anti-Profiteering cases and examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.