- Businesses that receive the benefit of paying lower taxes under the new goods and services tax (GST) regime can’t keep it with them. Instead, according to the GST Act, they must pass it on to consumers by reducing the price of the products they sell.
- “Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit,” the Act reads, “shall be passed on to the recipient by way of commensurate reduction in prices.”
- If any business fails to comply with this rule, authorities from the National Anti-Profiteering Authority (NAPA) will use the “anti-profiteering” clause of the Act to take action against them — by ordering a reduction of prices, imposing penalties, or even cancelling a company’s registration.
- The supposed intent of the clause is to prevent price rise induced by the imposition of the new national tax. In order to offset the higher taxes imposed on certain goods, the government wants to make sure consumers receive the benefits of lower taxes on other goods.