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

Under the anti-profiteering provision of the CGST Act, 2017, which of the following must be passed on to the recipient by way of commensurate reduction in prices?

Both a reduction in the rate of tax on a supply and the benefit of input tax credit must be passed on to the recipient through a commensurate reduction in prices, as Section 171(1) of the CGST Act provides. Neither benefit alone is covered.

  1. AAny reduction in the rate of tax on a supply or the benefit of input tax creditCorrect
  2. BOnly the benefit of a reduction in the rate of tax, not input tax credit
  3. COnly the benefit of input tax credit, not a reduction in tax rate
  4. DAny increase in the rate of tax on a supply of goods or services

Explanation

Section 171(1) requires that any reduction in the rate of tax on any supply of goods or services, or the benefit of input tax credit, be passed on to the recipient through a commensurate reduction in prices. Options covering only one of the two benefits are incomplete, and a tax rate increase is not covered by the provision.

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