Anti-profiteering measure.

Section 171(1)

Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.

Section 171(2)

The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.

AI Explanation

Anti-Profiteering Measure

In a bid to ensure fairness and prevent unjust gains, the government has implemented an anti-profiteering measure under Section 171 of the law.

Passing on Benefits

If there is a reduction in the tax rate on the supply of goods or services, or if there's a benefit of input tax credit, it is mandatory for the seller to pass on this advantage to the buyer. This should reflect in a corresponding reduction in the prices.

Role of the Central Government

The Central Government, acting on the recommendations of the Council, holds the authority to establish a specialized body. This body, as outlined in Section 171(2), is tasked with examining whether the reduction in tax rates or the benefits of input tax credits have genuinely led to a proportional decrease in the prices of the goods or services supplied.

In essence, this measure aims to ensure that the benefits intended for consumers as a result of tax reductions or input tax credits are not withheld by businesses, promoting a fair and equitable trading environment.

Section 171(3)

The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed.

[(3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten per cent of the amount so profiteered:

Provided that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority.

Explanation.—For the purposes of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services or both.]

AI Explanation

The authority mentioned in subsection (2) has the responsibility to carry out specific tasks and exercise powers as outlined in the regulations.

Penalty for Profiteering (Section 171(3A))

If, after examination, the authority concludes that a registered person has profiteered under subsection (1), that person must pay a penalty equal to ten percent of the profiteered amount. However, no penalty will be imposed if the profiteered amount is deposited within thirty days of the authority's order.

Explanation: For this section, "profiteered" refers to the amount determined due to not passing on the benefits of reduced tax rates on the supply of goods or services or the benefits of input tax credit to the recipient through a corresponding reduction in the price of goods or services.