All About Anti-Profiteering under GST | Section 171, Complaints & Sunset Clause Explained

The government introduced anti-profiteering rules under GST to ensure that businesses pass on the benefits of reduced tax rates and increased Input Tax Credit (ITC) to consumers through commensurate price reductions. Under Section 171 of the CGST Act, 2017, these rules empower authorities to monitor, investigate, and penalise businesses that fail to transfer GST benefits to end customers.

However, as part of the GST Council’s recommendations, the government has notified 1st April 2025 as the sunset date for accepting new anti-profiteering complaints, marking a significant transition towards market-driven pricing mechanisms.

This article provides an overview of the anti-profiteering law, its practical implications, recent updates, and how consumers can raise complaints.

Latest updates

Sunset clause effective 1st April 2025

• The government has notified 1st April 2025 as the sunset date for the anti-profiteering provisions under GST. Hence, the authority will not accept any new complaints or investigations regarding anti-profiteering.
• Existing complaints filed before 1st April, 2025, will continue to be adjudicated by the Principal Bench of the GST Appellate Tribunal (GSTAT), which has taken over jurisdiction from the Competition Commission of India (CCI) since 1st October 2024.
• This move reflects the GST Council’s intent to simplify compliance and allow market forces to determine pricing post this transitional phase.

What is the anti-profiteering law?

Section 171(1) of the CGST Act mandates that any reduction in GST rates or benefit of input tax credit must be passed on to the recipient by way of a proportionate decrease in prices. The law covers two main aspects:

1. Reduction in Tax Rate: If the GST rate on goods or services is reduced, businesses must lower their prices accordingly.
2. Benefit of Input Tax Credit (ITC): If businesses gain additional ITC under GST, this benefit should be reflected in reduced prices for consumers.

Practical examples on anti-profiteering

Example 1: Reduction of tax rate

• Restaurants: Before GST, eating out attracted a combined tax of about 20.5%. After GST, most standalone restaurants charge 5% GST (without ITC). However, restaurants located inside hotels with room tariffs of Rs. 7,500 or more per day must charge 18% GST (with ITC). Hotels with lower tariffs may opt for either 5% (no ITC) or 18% (with ITC) for their restaurant services.
• App-based taxis: If the GST rate on cab rides is reduced by 1%, aggregators are required to lower fares accordingly.
• FMCG goods: If the GST rate on a product is reduced, the manufacturer or retailer must revise the MRP downward. Not doing so is considered profiteering.

Example 2: Passing on ITC benefit

• Retail chains: Under GST, retailers can claim ITC on more inputs than before. This improved credit chain should result in lower prices or special “GST Sale” offers. Not passing on this benefit can trigger anti-profiteering action.
• Manufacturing: If a manufacturer’s tax cost drops due to better ITC, the price of finished goods should decrease.

Example 3: When a price increase is justified

• Domestic LPG: If a product like LPG, previously exempt, becomes taxable under GST, a price increase is justified and not considered profiteering.

Anti-profiteering authority structure

• Until September 2024: The NAA and the Competition Commission of India (CCI) handled cases.
• From 1st October 2024: All pending and new cases are handled by the Principal Bench of the GST Appellate Tribunal (GSTAT).

How to complain about anti-profiteering?

• Consumers can file complaints with the Standing Committee or State Screening Committees.
• Complaints must include evidence that GST benefits have not been passed on.
• From 1st October 2024 onwards, the GST Appellate Tribunal (GSTAT) handles anti-profiteering cases.
• Complaints can be submitted online via the official GST portal or through designated authorities.

How to file an anti-profiteering complaint (until 31st March, 2025)

• Who can file?: Any consumer or stakeholder.
• Where to file?: With the State Screening Committee, Standing Committee, or GSTAT (from October 2024).
• Evidence required: Invoices, price lists, communication with suppliers, etc.

Methodology to identify profiteering

• The NAA compares pre- and post-GST prices, profit margins, and cost structures to determine if businesses passed on tax benefits.
• Investigations may include examination of invoices, cost sheets, and ITC claims.
• If profiteering is established, the authority can order price reductions, refunds with interest/penalties, or even cancel the GST registration.

What is section 74 of the CGST Act?

Section 74 deals with cases of tax not paid or short paid due to fraud, willful misstatement, or suppression of facts. While separate from anti-profiteering, the department may invoke section 74 if profiteering involves fraudulent intent or deliberate evasion of tax.