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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 the anti-profiteering provision of the CGST Act, 2017, what must a supplier do when the rate of tax on a supply is reduced or he becomes entitled to a benefit of input tax credit?

The supplier must pass the benefit of the tax rate reduction or of input tax credit on to the recipient through a commensurate reduction in prices. The law imposes this duty automatically, without any request from the buyer, so keeping the benefit as extra margin is profiteering.

  1. ARetain the benefit as additional margin since the rate cut applies only to the Government
  2. BPass on the benefit to the recipient by way of commensurate reduction in pricesCorrect
  3. CPass on the benefit only if the recipient makes a written request
  4. DSurrender the benefit to the Consumer Welfare Fund in every case

Explanation

Section 171(1) requires any reduction in the rate of tax on a supply, or the benefit of input tax credit, to be passed on to the recipient by a commensurate reduction in prices. No request from the recipient is a precondition. Retaining the benefit is exactly what the section prohibits.

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