Anti-profiteering under GST: reduced tax incidence must be passed on through commensurate price cuts, with quantified profiteering recoverable.

Section 171(1) of the CGST Act applies where the overall tax incidence on a supply is reduced after GST comes into force and the supplier does not pass on that benefit by commensurate price reduction. The Authority accepted the pre-GST and post-GST incidence comparison, rejected the argument that only a GST-to-GST comparison could be made, and held that increased base price after 01.07.2017 supported profiteering. It further held that contemporanea exposito and downstream VAT could not override the statutory obligation to pass on the benefit. The respondent was held liable for profiteering and directed to reduce prices and deposit the quantified amount with interest.

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Issues: Whether the respondent failed to pass on the benefit of reduction in tax incidence and consequent GST rate reduction by commensurate reduction in price, and whether the profiteered amount was correctly quantified and recoverable.

Analysis: The Authority held that section 171(1) of the CGST Act, 2017 is attracted where the overall tax incidence on a supply is reduced after the coming into force of GST and the supplier does not reduce the price commensurately. It accepted the DGAP's comparison of the pre-GST and post-GST incidence for the product, found that the base price had increased after 01.07.2017, and rejected the contention that only a pure GST-to-GST comparison could be made. The Authority further held that the respondent's arguments on contemporanea exposito and on inclusion of downstream VAT in the computation did not displace the statutory mandate to pass on the benefit to recipients. It also recorded that the respondent had admitted profiteering and agreed to deposit the quantified amount.

Conclusion: The respondent was held liable for profiteering and directed to reduce the price commensurately, deposit the quantified profiteered amount with interest, and comply with the further directions issued under the CGST Rules, 2017.

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