Goods and Services Tax (hereinafter referred to as “GST”) is a single tax on the supply of goods and services. The dual system of taxation levied on the consumption of goods/ services at the Central as well as State levels is applicable only on value addition at each stage. With the objective of avoidance of multiple taxation and enhancement of clearer administration of the system to prevent tax evasion, GST comes forward as a pragmatic tax regime.

Liability for not passing on GST benefits

The "anti-profiteering" measures enshrined in the GST law provide an institutional mechanism to ensure that the full benefits of input tax credits and reduced GST rates on supply of goods or services flow to the consumers.

The National Anti-Profiteering Authority (hereinafter referred to as “NAA”) has been established by the Government, with the objective to ensure that the benefits of implementation of GST in terms of lower prices of the goods and services reach the consumers. In the event the NAA confirms there is a necessity to apply anti-profiteering measures, it has the authority to order the supplier / business concerned to reduce its prices or return the undue benefit availed by it along with interest to the recipient of the goods or services. Further, it may impose a penalty on the defaulting business entity and even order the cancellation of its registration under extreme circumstances.[1]

In a forward-looking judgement[2] dated September 7, 2018, the NAA ruled that the suppliers would be held liable for not passing on the benefits of GST rate reduction on the sale of goods.

In the aforesaid matter it was alleged that a supplier/ business entity- M/s Sharma Trading Company had not passed on the benefit of reduction in the rate of tax (from 28% to 18%) by lowering the price of a product - Vaseline when the same was purchased on November 15, 2017. 

It was observed that despite the reduction in the rate of GST, there was no reduction in the sale price rather the base price was increased thus amounting to illegal profiteering and contravening the provisions of CGST Act, 2017 (Section 171). The supplier in the recent case was held to be bound by the GST registration norms requiring him not to charge the enhanced base price resulting in negation of tax lowering. Also, it was mandatory for the supplier displayed the revised MRP as per the provisions of the Legal Metrology (Packaged Commodity) Rules, 2011.

The NAA ordered the supplier to reduce the prices and return to the consumer the amount of profiteering in terms of tax @ 18% interest.

By the ruling stated above, NAA reposes faith and confidence amongst the consumers that they would not be made subject to the illegal profiteering of the suppliers in conscious disregard of their obligations stated under law.