GST rate reduction must be passed on through lower consumer prices and revised MRPs where required.

A reduction in GST must be passed on through a commensurate reduction in consumer prices, and for impacted pre-packaged commodities the reduced MRP must also be reflected in accordance with legal metrology requirements. The Commission found that the available record did not satisfactorily establish that the tax benefit had been fully passed on in the required manner, including by reduction and re-fixation of MRPs where applicable. The DGAP report concluding no contravention under Section 171 could therefore not be accepted as final on the existing material, and the matter was remanded for fresh inquiry on pass-through of the tax reduction.

---

---

Issues: Whether the benefit of reduction in GST rate had to be passed on by commensurate reduction in prices, including reduction and re-fixation of MRPs on impacted pre-packaged commodities, and whether the DGAP report concluding no contravention under Section 171 could be accepted on the existing record.

Analysis: Section 171 of the Central Goods and Services Tax Act, 2017 requires any reduction in tax rate to be passed on to the recipient by way of commensurate reduction in prices. The provision is intended to prevent unjust enrichment and to ensure that tax foregone is reflected in the final price borne by the consumer. The Commission applied this principle along with the requirements governing pre-packaged commodities under Section 18 of the Legal Metrology Act, 2009 and Rule 6(3) of the Legal Metrology (Packaged Commodities) Rules, 2011, read with the relaxation permitting additional sticker, stamping, or online printing for reduced MRP. On the facts noted, the impacted products were required to reflect reduced MRPs and the available record did not satisfactorily establish that the benefit had been passed on commensurately in the manner required for final consumer pricing.

Conclusion: The DGAP report could not be accepted as final on the existing material, and the matter required further investigation.

Final Conclusion: The proceeding was sent back for fresh inquiry on the issue of whether the tax reduction had been passed on in accordance with Section 171 and the allied legal metrology requirements.

Ratio Decidendi: A reduction in GST must be reflected by commensurate reduction in the consumer-facing price, and where the record does not clearly establish such pass-through, further investigation may be directed instead of accepting a no-contravention report.

---