GST anti-profiteering on rate cuts requires passing tax benefits to buyers; later penalty provisions cannot apply retrospectively.

A GST rate reduction from 28% to 18% was treated as a benefit that had to be passed on through commensurate price reduction under the anti-profiteering rule. The Commission accepted that the supplier increased the base price instead of lowering the sale price, and upheld the quantified profiteered amount of Rs. 2,06,100, with interest at 18% from collection until payment, on the basis that the recipients were identifiable and the computation was supported by invoice data. Penalty was not imposed because Section 171(3A) came into force only on 01.01.2020 and could not apply retrospectively to earlier conduct.

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Issues: (i) Whether the reduction in GST rate on the impugned goods from 28% to 18% was required to be passed on to the recipients by commensurate reduction in price under Section 171 of the Central Goods and Services Tax Act, 2017. (ii) Whether the profiteered amount of Rs. 2,06,100 was correctly determined and recoverable with interest. (iii) Whether penalty could be imposed under Section 171(3A) of the Central Goods and Services Tax Act, 2017 for the period prior to its insertion.

Issue (i): Whether the reduction in GST rate on the impugned goods from 28% to 18% was required to be passed on to the recipients by commensurate reduction in price under Section 171 of the Central Goods and Services Tax Act, 2017.

Analysis: The rate reduction on the impugned goods operated from 15.11.2017 by Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017. The investigation found that the respondent increased the base price instead of reducing the sale price after the tax reduction. On the material placed before it, the Commission concluded that the statutory benefit of reduced tax had not been passed on to the recipients.

Conclusion: The issue was decided against the respondent and in favour of revenue.

Issue (ii): Whether the profiteered amount of Rs. 2,06,100 was correctly determined and recoverable with interest.

Analysis: The profiteered amount was worked out by comparing the average pre-rate-reduction base price with the actual post-rate-reduction selling price across the relevant invoices. The Commission accepted the computation, held that the recipients were identifiable, and directed payment of the quantified amount with interest at 18% from the date of collection until payment, under the applicable anti-profiteering framework.

Conclusion: The quantified profiteered amount of Rs. 2,06,100 was upheld with interest and recovery directions.

Issue (iii): Whether penalty could be imposed under Section 171(3A) of the Central Goods and Services Tax Act, 2017 for the period prior to its insertion.

Analysis: The penalty provision under Section 171(3A) was inserted only with effect from 01.01.2020 by Section 112 of the Finance Act, 2019. Since the violation found in the case related to the period 15.11.2017 to 08.07.2019, the provision was not in force during the relevant time.

Conclusion: Penalty under Section 171(3A) could not be imposed retrospectively.

Final Conclusion: The respondent was held liable to pass on the anti-profiteering amount with interest, but penalty was declined for want of retrospective operation of the penal provision.

Ratio Decidendi: Where a rate reduction under the GST law is not passed on by commensurate price reduction, the resulting profiteered amount is recoverable with interest, but a penal provision inserted later cannot be applied retrospectively to earlier contraventions.

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