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Indirect Tax Laws and Practice · Anti-profiteering

Anti-Profiteering Orders, Penalty and Consumer Welfare Fund Deposit

Updated 11 October 2026 · Fact-checked

If the Authority finds that a registered person did not pass on a GST rate cut or extra input tax credit through lower prices, it may order a price reduction, return of the unpassed amount with 18% interest, a 50:50 deposit in the section 57 Fund and the concerned State's Fund where the recipient does not claim or is unidentifiable, penalty, and cancellation of registration. It must determine this within six months of the DG's report.

Understand Powers, Orders and Penalty on Profiteering

Anti-profiteering exists to make sure the benefit of a GST rate cut or of extra input tax credit reaches the buyer. If a supplier keeps the benefit and prices stay the same, the supplier has profiteered. The Authority decides this after getting the report of the Director General of Anti-profiteering.

This topic is about what happens after the Authority finds profiteering. Under the rule on the Authority's order (Rule 133), the Authority must decide within six months from receiving the DG's report whether the benefit was passed on by a commensurate reduction in prices. If any interested party asks in writing, the Authority must give a hearing.

If the Authority finds the benefit was not passed on, it may order five things: (a) reduction in prices; (b) return to the recipient of the amount not passed on, with interest at 18% from the date of collection of the higher amount till the date of return; (c) deposit in the Fund constituted under section 57 and in the Fund of the concerned State, where the eligible person does not claim the return or is not identifiable; (d) penalty as specified under the Act; and (e) cancellation of registration.

Keep the first two apart. Clause (a) is an order for reduction in prices. Clause (b) is an order to return to the recipient the amount not passed on, with interest. They are separate orders listed in rule 133(3).

The fund deposit is a fallback. It applies when the buyer does not claim the money or cannot be identified. Then 50% of the amount, along with interest at 18% from the date of collection of the higher amount till the date of deposit, goes to the Fund under section 57 of the CGST Act. The remaining 50% of the amount goes to the Fund of the concerned State. The Authority may also seek clarification from the DG, send the matter back for further investigation, or direct investigation of other goods or services.

Key rules to remember

Time limit for the Authority's decision
Order within 6 months from receipt of the DG's report
Originally three months; substituted by six months from 28.06.2019.
Amount to be returned to recipient
Amount not passed on = Profiteered amount; interest = 18% p.a. from date of collection of higher amount to date of return
Interest runs on the amount from collection date, not from the date of the order.
Split when buyer is unidentified or does not claim
Fund under section 57 = 50% of the amount + interest at 18% till the date of deposit; Fund of the concerned State = remaining 50% of the amount
As worded in the rule, the interest goes with the 50% deposited in the section 57 Fund. Do not add it to the whole amount before splitting.
Orders the Authority may pass
(a) price reduction; (b) return with interest; (c) fund deposit; (d) penalty; (e) cancellation of registration
The rule says 'may order', so these are powers, not automatic outcomes.
Concerned State
State or Union Territory in respect of which the Authority passes the order
Used for the State's 50% share.

How to solve Powers, Orders and Penalty on Profiteering questions

Use this sequence for any question on the Authority's order and its consequences.

  1. 1Check that the DG's report has been received and note the date. The six-month period for the order runs from it.
  2. 2Confirm profiteering: was the benefit of a rate cut or extra input tax credit not passed on by a commensurate price reduction?
  3. 3Work out the profiteered amount: the extra amount collected from recipients because the benefit was kept.
  4. 4Decide which orders apply: price reduction going forward, and return of the amount to identifiable recipients.
  5. 5Add interest at 18% from the date of collection of the higher amount to the date of return or deposit.
  6. 6If recipients do not claim or cannot be identified, take 50% of the amount plus the interest till the date of deposit to the Fund under section 57, and the remaining 50% of the amount to the concerned State's Fund.
  7. 7Mention penalty under the Act and possible cancellation of registration where relevant.
  8. 8State the conclusion in a line, quoting the rule words such as 'commensurate reduction in prices'.

Quickest way: Five-order checklist

When to use it: For MCQs and short-note questions asking what the Authority can order.

  1. Recall: Price cut, Return with 18% interest, Fund deposit, Penalty, Cancel registration.
  2. Link fund deposit only to cases of no claim or unidentifiable recipients.
  3. For the fund split, take 50% of the amount for each Fund, and add the interest till the date of deposit to the section 57 share only.
  4. Recall the time limit: six months from the DG's report.

Common mistakes in Powers, Orders and Penalty on Profiteering

  • Treating price reduction and return of amount as the same remedy.

    Both reduce what the buyer bears.

    Fix: Price reduction is an order for reduction in prices. Return is an order to give the recipient the amount not passed on, with interest at 18%. They are separate clauses (a) and (b) of rule 133(3).

  • Sending the whole amount to the fund.

    Students remember only the fund and not the recipient-first rule.

    Fix: Recipients get the money first. The fund deposit applies only where the eligible person does not claim or is not identifiable.

  • Writing the fund split as going to one Fund only, or ignoring the State's share.

    Section 57 is remembered but the concerned State's Fund is forgotten.

    Fix: Write 50% to the Fund under section 57 and the remaining 50% to the Fund of the concerned State.

  • Stating the time limit as three months.

    Older material used three months.

    Fix: The current text says six months from receipt of the DG's report.

  • Saying interest runs from the date of the order.

    Assuming interest follows the decision date.

    Fix: Interest at 18% runs from the date of collection of the higher amount till return or deposit.

  • Saying penalty and cancellation are automatic.

    Overreading the list of orders.

    Fix: The rule says the Authority 'may order'. Write 'can be ordered'.

Worked examples

Example 1

A supplier sold goods to buyers after a GST rate cut but did not reduce prices. The Authority determines that ₹10,00,000 was collected in excess from identifiable buyers, who claim it. State the orders the Authority can pass on the amount, and the position on the fund deposit.

Show the solution
  1. The benefit of the rate cut was not passed on by commensurate price reduction, so profiteering is established.
  2. The Authority may order a reduction in prices.
  3. It may order return of ₹10,00,000 to the buyers along with interest at 18% from the date of collection of each higher amount till the date of return.
  4. Buyers are identifiable and have claimed the amount, so the fund deposit order does not arise.
  5. The Authority may also order penalty under the Act and, where warranted, cancellation of registration.

Answer: Price reduction, return of ₹10,00,000 with 18% interest from collection to return, and possibly penalty and cancellation. No fund deposit, because buyers are identifiable and claim the amount.

Exam tips

  • Learn the five orders in list form and write them as separate points.
  • In numerical questions, split the amount 50:50 first, then add the interest to the section 57 share only.
  • Use the phrase 'commensurate reduction in prices' and quote the six-month limit.
  • In MCQs, watch for options that say penalty is mandatory or that the fund gets 100%.
  • Say 'may order' to show you know these are powers.

Practice questions from Anti-profiteering

Powers, Orders and Penalty on Profiteering in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Powers, Orders and Penalty on Profiteering: frequently asked questions

What can the Anti-profiteering Authority order if profiteering is proved?

It may order a price reduction, return of the unpassed amount to the recipient with 18% interest, deposit in the Fund under section 57 and the concerned State's Fund where the recipient does not claim or is unidentifiable, penalty under the Act, and cancellation of registration.

What is the difference between price reduction and refund in an anti-profiteering order?

Price reduction is an order for reduction in prices. The return of amount is an order to give the recipient the amount not passed on, with interest at 18% from collection to return. They are separate orders listed in rule 133(3).

When is the amount deposited in the Fund under section 57 and the State Fund?

Only where the eligible person does not claim the return or is not identifiable. Then 50% of the amount, along with interest at 18% till the date of deposit, goes to the Fund under section 57. The remaining 50% of the amount goes to the Fund of the concerned State.