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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Compliance Rating, Anti-Profiteering, GST Practitioners and Authorised Representative

Under Section 171(1) of the CGST Act, 2017, which of the following must be passed on to the recipient by way of commensurate reduction in prices?

Section 171(1) requires that any reduction in the rate of tax on a supply of goods or services, as well as the benefit of input tax credit, be passed on to the recipient through a commensurate reduction in prices. Both limbs are covered.

  1. AAny increase in the rate of tax on a supply
  2. BAny reduction in rate of tax on a supply or the benefit of input tax creditCorrect
  3. COnly the benefit of input tax credit, and not a rate reduction
  4. DOnly a reduction in rate of tax, and not input tax credit benefit

Explanation

Section 171(1) covers both limbs: a reduction in the rate of tax on any supply of goods or services and the benefit of input tax credit. Both must be passed on through a commensurate price reduction. Options limiting it to only one limb are incomplete, and a rate increase is not covered.

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