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CMA Final · Indirect Tax Laws and Practice · Anti-profiteering

The Authority concludes that Surya Appliances Ltd. profiteered Rs 8,00,000 by not passing on a rate reduction. The order is passed on 10 March. What is the position regarding penalty under the CGST Act?

Penalty equals ten per cent of the profiteered amount, so Rs 80,000. However, no penalty is leviable if the profiteered amount of Rs 8,00,000 is deposited within thirty days of the date of the Authority's order.

  1. APenalty of Rs 80,000 is leviable, but it is not leviable if Rs 8,00,000 is deposited within thirty days of the orderCorrect
  2. BPenalty of Rs 80,000 is leviable irrespective of when the profiteered amount is deposited
  3. CPenalty of Rs 8,00,000 is leviable, equal to the profiteered amount
  4. DNo penalty is leviable because the penalty applies only to input tax credit benefits

Explanation

Penalty is ten per cent of the profiteered amount: 10% x 8,00,000 = Rs 80,000. The proviso waives it if the profiteered amount is deposited within thirty days of the order. It applies to both rate reduction and ITC benefits.

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