Anti-Profiteering Provision

Rationale for Anti Profiteering Provisions

Invariably all the countries implementing GST have faced a sudden rise in inflation and the profiteering practices followed by the business community were alleged as one of the reasons for the rise in inflation. Learning from the global experience, anti-profiteering measures have also been inserted in the Indian GST Law.

Legal Provisions

The anti-profiteering mechanism is provided in section 171 of the CGST Act, 2017.  Key ingredients of section 171 are as under

  • Any reduction in rate of tax on any supply of goods or services OR the benefit of input tax credit accrued to the supplier shall be passed on to the recipient by way of commensurate reduction in prices.
  • The Central Government is empowered to constitute Authority ([1]National Anti-Profiteering Authority- “NAA” or “Authority” henceforth) 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 prices of the goods or services or both supplied by him.
Practical examples to explain legal provisions
  • AB Ltd was selling MRP based packaged FMCG Goods at Rs. 50 per KG in the Pre-GST Regime. This MRP was inclusive of say 12.5% Excise and 13.5% MVAT, totalling to appx 26% taxation. Post GST said commodity is subject to say 18% GST. In the GST regime, If AB Ltd is selling same the product at Rs. 50 (without even commensurate increase in the quantity of its outward supply), then prima facie anti-profiteering provisions are applicable, as AB Ltd. has failed to pass on reduction in tax to its recipients.
  • Builders and developers were subject to restricted Cenvat in the Pre-GST regime. After the introduction of GST, builders were entitled to global ITC (except for section 17(5) situations & a new regime with a concession rate of taxation). If post implementation of GST, the builder charges the same price to a unit buyer who has booked flat in the Pre-GST regime, then prima facie anti-profiteering provisions are applicable, as the builder has failed to pass on ITC benefits to unit buyers.  
  • Since the implementation of GST, the GST council has recommended reduction in GST rate of many commodities. If such commodities are sold at the same price pre and post-reduction in rate then prima facie anti-profiteering provisions are applicable.

Consequences to be faced by supplier if anti profiteering is established

Once anti-profiteering is established, Authority may order:

  1. reduction in prices
  2. return of the amount not so passed on
  3. deposit of the illegal profit accrued to the Consumer welfare fund
  4. imposition of penalty; and
  5. cancellation of registration of the supplier.
1. In terms of Rule 122 of the CGST Rules, 2017  the National Anti-profiteering Authority has been constituted for enforcement of the provisions of sub-section (1) of Section 171

Important observations arising out of decided investigation matters of Anti-profiteering 

Though NAA has investigated many matters till now and it is difficult to generalise but few thumb rules are presented below for ease in the understanding of profiteering situations:

  • Profiteering can’t be established if an increase in the price charged for outward supply is due to reasons like an increase in the operational cost, establishment expenses, inflation etc.
  • Profiteering can’t be established if no additional benefit is accruing to the supplier out of any increased availability of ITC
  • Profiteering can’t be established if there is no reduction in the tax rate applicable to the supplier
  • Merely because the base price of output supply has been increased per se such increase does not substantiate profiteering. 
No provision in the GST Laws for appeal against NAA’s orders

Readers might be slightly surprised but the definition of ‘Adjudicating Authority’, as per section 2(4) of the CGST Act, 2017 specifically excludes “the authority referred to in Section 171(2) of the CGST Act, 2017”.  Therefore, no appeal can be filed under Sec 107 against the NAA’s orders. Further, a conjoint reading of section 2(4) read with section 109 & section 117 of the CGST Act makes it clear that no statutory appeal can be filed against the orders of NAA either before the Appellate Tribunal or before the Jurisdictional High Court. Therefore, the only remedy available to an assessee aggrieved by an order passed by NAA is to file a writ petition against the order before the jurisdictional High Court under article 226 of the Constitution. Due to inherent limitations of writ jurisdiction in many cases where NAA has concluded that profiteering situation has occurred, Hon’ble High courts have ordered pre-deposit of certain % of the profiteered amount as determined by the NAA, as a condition for admission of the writ petitions

Who can file a complaint against profiteering?

Any consumer or organisation experiencing or noticing the non-reduction in the price of the Goods or Services or both to commensurate the reduction in the rate of GST can file a complaint under the anti-profiteering provisions with proper evidence.

Any registered recipient of goods, trader, wholesaler or retailer, who could not get the benefit of the input tax credit (ITC) available to their supplier by way of commensurate reduction of the price of the supplies received, can file the complaint with proper evidence.

Even Commissioner on its own can also file a complaint.

Whether the complainant is eligible to recover the amount on account of his complaint against profiteering?

Authority can compel the defaulter to return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of 18% from the date of collection of higher amounts till the date of return of such amount. When the recovery of the amount including interest cannot be returned to the eligible person may be for reason like an eligible person does not claim the return of the amount or such person is not identifiable, the recovered amount shall be deposited in the Consumer Welfare Fund constituted under CGST and SGST/UTGST Act, in equal proportions.

How to file a complaint against a taxpayer indulging in profiteering

Aggrieved person/user/consumer can file an online complaint on the website by doing the following processes

  1. Registration (Process is almost similar to the creation of email id on
  2. Log-in
  3. Make complaint

The Complaint form has 4 Parts viz Part A,B,C & D.

Part A consists of general information about the applicant viz name, address, contact number, email id etc. To avoid hoax complaints applicant must fill up these details and also upload his Photo Identity Proof e.g. Aadhar Card, Pan card etc.

Part B consists of general information about the supplier who has not passed on the benefits viz, name, address and contact Number etc.

Part C consists of the particulars of goods or services on which profiteering is alleged by the complainant. viz, a brief description of such goods and services, earlier price/value per unit, present price/value per unit, earlier MRP/ present MRP etc.

Part D consists of the actual charge of the complainant, ie whether or not the benefit of reduction in tax rate has been passed on / whether or not the benefit of ITC has been passed on by the defaulter? The applicant is expected to attach evidence of profiteering like copies of invoice, price list, contract/ agreement/product brochures etc. in jpg, doc or pdf format with size restriction of 3 MB per attachment. Further, NAA has started helpline No. 011-21400643 to resolve queries related to the registration of complaints against profiteering.

In addition, an application can also be filed manually in Anti-Profiteering Application Form (APAF-1) before Standing Committee (in case the issue is of PAN India nature) or State level Screening Committee (in case the issue of local nature).  Address of both these committees are available on website

Tracking status of an application

The complainant can track the application filed online through the ‘track complaint’ module available on the website, if it is filed online. Otherwise, the complainant can contact the Anti-profiteering at: 011-23741544; 011-23741542; e-mail id: to track the status.

Organizational Structure of NAA

There are a 3-tier structure for the investigation and adjudication of the complaints regarding profiteering.

  1. State-level Screening Committees and Standing Committee
  2. Directorate General of Anti-profiteering (DGAP)[2] and
  3. National Anti-profiteering Authority
2. The Directorate General of Anti-profiteering (DGAP) has been created vide office order No. O5/Ad.IV/2018 issued by the Central Board of Indirect Taxes & Customs, Department of Revenue, Ministry of Finance, Government of India on 12.06.2018 by renaming the ‘Director General  of Safeguards’ as ‘Directorate General of Anti-profiteering’
Internal Process of NAA

CGST and corresponding State GST Rules lays down the procedure to be followed during the adjudication of anti-profiteering compliant.  Such procedure can be broadly classified as under:

  • Scrutiny of application
  • Investigation
  • Examination by Authority
  • Order by Authority
  • Implementation of the orders of the Authority

The internal process of anti-profiteering is briefly discussed as under:

Scrutiny of application

In terms of Rule 128 of CGST Rules, all applications received from interested parties on issues of local nature shall first be examined by the Screening Committee. The Screening Committee on being satisfied that the supplier has not passed on the reduction in rate of tax on any supply of goods or services or the benefit of ITC on to the recipient by way of commensurate reduction in the prices will forward the application with its recommendations to the Standing Committee for further action.

The Standing Committee shall within 2(two)[3] months of from the date of receipt of application examine the accuracy and adequacy of the evidence provided in the application to determine whether there is prima-facie evidence to support the claim of the applicant that the benefit of reduction in the rate of tax on any supply of goods or services or the benefit of ITC has not been passed on to the recipient by way of commensurate reduction in prices. If it is satisfied, then the matter will be referred to the DGAP for a detailed investigation in terms of Rule 129 of CGST Rules.


DGAP shall conduct an investigation and collect the necessary evidence to determine undue profiteering. DGAP shall before initiation of the investigation, issue a notice to the interested parties and to such other persons as deemed fit for a fair enquiry into the matter. The evidence or information presented to the DGAP by one interested party can be made available to the other interested parties, participating in the proceedings.

The DGAP shall complete the investigation within a period of 3(three) months or within such extended period not exceeding a further period of 3[4] (three) months for reasons to be recorded in writing as allowed by the Standing Committee and, upon completion of the investigation, furnish to the Authority, a report of its findings along with the relevant records.

 3. Extension is 1(One) month may now be granted by virtue of Notification No 31/2019 – Central Tax – dated 28th June 2019
 4. Time-limit extended to 6(six) months vide Notification No 31/2019 – Central Tax – dated 28th June 2019
Examination by Authority

Authority shall (after granting an opportunity of hearing to the interested parties if so requested) within a period of [5]3(three) months from the date of the receipt of the report from the DGAP determine whether a registered person has passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices.

The authority may refer the matter to the DGAP to cause further investigation or inquiry.

Order by Authority

The authority may pass any interim or final order in the proceedings pending before it as is deemed just and proper by it in the facts and circumstance of the case.

Implementation of Order of Authority

Authority may direct any authority of central tax, state tax or union territory tax to monitor the implementation of the order passed by it. Further, any order passed by the Authority shall be immediately complied with by the registered person failing which action shall be initiated to recover the amount in accordance with the provisions of the IGST /CGST/SGST / UTGST Act, as the case may be.

Recent Changes in Anti Profiteering Provisions

A. Change in Rules

Notification No 31/2019 – Central Tax – dated 28th June 2019 has made the following changes in CGST Rules relating to Anti Profiteering:

Suo-Moto Cognizance

Authority is ow empowered to take suo-moto cognizance of an alleged contravention of the provision of Section 171 of the Act. The Notification inserts a new Rule 133(5)(a) which allows the Authority to cause investigation or enquiry with respect to goods and services other than those forming the subject matter of the DGAP report. The provision states that such power shall be exercised in cases whereupon the receipt of the DGAP report, NAA has ‘reasons to believe’ that there has been a contravention of the provisions of section 171 in respect of goods and services other than those covered in the said report.

Extension of deadline

The Government has doubled the time limit to 6(six) months for DGAP to complete the investigations from the date of receipt of the reference from the Standing Committee. NAA can now issue the Order within 6(six) months, as opposed to 3 months earlier, from the date of receipt of the report from DGAP. Further, the standing committee can now apply for a 1(One) month extension from the NAA, in addition to the 2(two) months allowed for examining a complaint or application.

Power to Summon

NAA is now empowered to summon any person in relation to an Anti-profiteering inquiry. This was earlier limited to the DGAP or its officers only. 

5.Time-limit extended to 6(six) months vide Notification No 31/2019 – Central Tax – dated 28th June 2019

B. Changes in CGST Act

Imposition of Penalty

The Finance Act 2019 has further amended section 171 of the CGST Act by inserting a new subsection (3A). In terms of this subsection, If NAA after holding the examination as required under the said sub-section concludes that any registered person has profiteered then such person shall be liable to pay a penalty equivalent to 10% of the amount so profiteered. However, 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.

Extension of Anti Profiteering Provisions

The Anti-profiteering provisions as originally framed were to apply up to 2(two) years from the introduction of GST (i.e. up to 30 June 2019). The said provision is now extended for a further period of 2(two) years. Accordingly, the tenure of NAA is extended to 30th June 2021.

Both these changes are inserted w.e.f. 1st Jan 2020.

Recent NAA judgements

Just to acquaint readers about few notable judgements passed by NAA in past one year following 2 judgements are briefly narrated.

Starbucks Coffee

GST rate on restaurant service reduced from 18% to 5% w.e.f. 15.11.2017 without the benefit of ITC. It was alleged that Starbucks had increased the base prices of the food items (Tea and Iced Beverages) sold and applied 5% GST thereon and thereby denied the benefit of rate reduction to the buyers. NAA in its order dated 28th October 2020 concluded that the respondent has profiteered to the tune of Rs. 1,04,70,664/- during the period from 15.11.2017 to 30.06.2018.

A Similar ruling was also delivered in the case of franchisee of another popular restaurant services “Subway”.

Bajaj Electricals Limited

The Government had reduced the GST rate on steam iron from 28% to 18% w.e.f. 27th July 2018. Respondent has not increased the base price of the product on reduction of GST rate. However, as a part of the business policy of revising the base price of its products, the base price of the product was increased from Rs 676 to Rs. 696 in October 2018. NAA held that base price was not increased when GST rate was reduced and subsequent hike in October 2018 was a part of general practice followed every year and hence anti-profiteering allegations are not proved.

The above 2(two) rulings from NAA also underline one important point that anti-profiteering provisions do not come in the way of business practices of the corporates nor it prohibits raising of prices, but it does not intend to allow the supplier to benefit  due to reduction in GST rate or increase in the ITC.

Analysis of High Court Judgements

Till now almost 200 orders are passed by NAA and in the majority of cases NAA concluded the existence of profiteering, however, the profiteering amount collected by NAA is a tiny fraction of GST collected so far.  Further, a writ petition has been filed against most of the orders challenging order of NAA and on payment of pre-deposit such orders have been stayed by various High Courts.

Key allegations raised by the writ petitioners in their writ petition are as under:

  • Provision of section 171 of the CGST Act and Chapter 15 of the CGST Rules and in particular Rules 126,127 & 133 are constitutionally invalid.
  • There is no judicial member in the NAA.
  • Under the GST law, there is no provision for the constitution of an appellate authority to review the orders passed by the NAA.
  • It is the NAA who issues notice to the suspected profiteer, it is NAA who determines what amounts to profiteering in a given situation. Further, it is the NAA who adjudicates the said notices without any provisions for an appeal. Such extraordinary powers of NAA  is contrary to the settled legal position regarding the constitution and functioning of quasi-judicial authorities and tribunals.

Just to familiarise readers about recent trends at high courts few notable High court proceedings against orders passed by NAA are briefly narrated as under:

Glenmark Pharmaceuticals Limited & Ors.  

To avoid conflicting views of High Courts on the constitutional validity of the provisions impugned in the writ petitions across the country, Glenmark has filed a writ petition before the Hon’ble Supreme court seeking transfer of similar cases pending before the Bombay HC, Punjab and Haryana HC to the Delhi HC. [TS-751-SC-2020-NT]. Readers may please if the petitioner succeeds then all such matters shall be heard by only Delhi High Court.  This matter is right now at the hearing stage before the Hon’ble Supreme Court. [TS-751-SC-2020-NT]

Samsung India Electronics Pvt. Ltd. vs. Union of India & Ors.

Samsung has filed a writ petition with a plea that section 171 of the CGST Act and Rules 126, 127 and 133 of the CGST Rules be declared unconstitutional and ultra vires Articles 14, 19(1)(g), 246A, 265 and 300A of the Constitution. Further prayer was also made to declare the constitution of NAA under Rule 122 as unconstitutional.  The said matter is presently under consideration before Hon’ble Delhi High Court.

Further Delhi High court has allowed Samsung to deposit the balance principal of profiteered amount as quantified by NAA in consumer welfare fund in instalments. [6]  [TS-427-HC-2020(DEL)-NT] 

6. Said decision was also followed in Phillips India Limited Vs. Union of India &Ors [TS-427-HC-2020(DEL)-NT],  M/s. Samsonite South Asia Pvt. Ltd. Vs. Union of India & Ors. [TS-546-HC-2020(DEL)-NT] and Patanjali Ayurved Ltd. Vs. Union of India & Ors. [TS-572-HC-2020(DEL)-NT]. Accordingly, all these petitioners are now allowed to deposit balance principal of profiteered amount as quantified by NAA  in consumer welfare fund in instalments

Dra Aadithya Projects Pvt. Ltd.

Recently in March 2021, the Hon’ble Delhi High court has granted an interim stay on an antiprofiteering investigation by DGAP on a complaint filed by unit buyers who have booked their units on or after 1st July 2017. The key argument advanced by the writ petitioner is that there is no element of the passing of benefit under section 171(1) of the CGST Act/Corresponding SGST Act for unit buyers whose agreement has been entered into post introduction of GST, for the reason that there is neither change in the rate of tax nor there are any benefits of any additional ITC. The price agreed between the developer and such unit buyer is already negotiated prices after the introduction of GST.

In the opinion of the paper writer aforesaid stay order being interim one and based on peculiar facts, the industry will have to wait till the final outcome of the matter but certainly, such trendsetting judgement is likely to clarify the vexatious issue of antiprofiteering.


While the government came up with the idea of anti-profiteering in the GST law to ensure consumers did not get short-changed with suppliers not passing on GST rate-cuts, however almost all adverse orders of the NAA are being challenged at various High Courts. In most cases, the courts have stayed the orders and the litigation is in progress. With most NAA orders being embroiled in litigation, the key purpose of the existence of the NAA, which is to ensure that the GST benefit is passed on to the consumer, is yet to be achieved.

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