NATIONAL

ANTI-
PROFITERRIN
G AUTHORITY
(napa)
BY-JOB DESCRIPTION
PRAKYATH RRAM
.
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CONTENTS-
1. Introduction to Anti-profiteering.

2. Legal provisions in GST Act relating

to Anti profiteering.

3. Landmark Judgements.

4. Practical Consideration or Issues and

Challenges.

5. Conclusion.
 INTRODUCTION
“Profit is fine, profiteering is not”.

“Don’t let someone profiteer at your expense”.

PROFITEERING- Profiteering is a term for the act of making

profits by methods considered unethical.
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ANTI-PROFITEERING MODELS:

MALAYSIAN MODEL-

• Through the existing legislation called ‘Price Control and Anti-profiteering Act 2011’ ,
Amendment to the existing legislation was done through amendment act 2014 the provisions
are read as under;
“Sec. 15(1A) The mechanism to determine that profit is unreasonably high referred to in
subsection (1) includes the Minister determining a certain period during which there shall be no
increase in the net profit margin of any goods or services.”
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AUSTRALIAN MODEL-

• Australia introduced GST law on July 1st, 2000 under the New Tax System (NTS) for replacement of
number of existing indirect taxes including wholesale sales tax. In Australia, the anti-profiteering
monitoring remained instrumental for 3 years, including 2 years post implementation.
• The Australian lawmakers introduced a prices oversight regime under the Trade Practices Act, in which the
Australian Competition and Consumer Commission ( ACCC) was entrusted with specific
responsibilities to oversee pricing responses to the introduction of NTS ( Including GST).
• The guidelines issued by the ACCC are as follows:
Net Dollar Margin Method: The net dollar margin rule was a fundamental principal of the guidelines for
the determination of the price variance & changes respectively. The principle of Net dollar or Price margin
method is that if due to the introduction of GST, incremental taxes and costs of input fall by $1 then prices
should also fall by at least $1. If, after taking into account the cost reductions resulting from the NTS, the costs
of a business rose by $1, then prices might rise by no more than that amount.

Price margin method: Further as per price margin method, prescribed that in any event, the prices charged by
the businesses should not rise by more than 10 per cent because of tax changes due to two reasons (ACCC
2000a, 2000d). The reason was that the net cost of inputs/raw materials used by the companies to run their
business was not expected to increase beyond 10 per cent after consideration of the claim of an input tax credit
for the GST paid (ACCC 2000d).
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Indian History of Profiteering & Law Under

GST-

The term anti-profiteering is not new for the Indians as well,

although it has been disseminated to the mass for the first time
after introduction for the GST. In 1958, West Bengal introduced
“The West Bengal Anti-Profiteering Act, 1958” to regulate the
prices and supplies of certain specified goods. Further, the act had
laid down measures to prevent profiteering in certain articles in
daily use at that point of time. However, Anti-profiteering in GST
is not regulating the supply; it is only monitoring the price
changes due to the reason of introduction of GST.

Later “The west Bengal anti-profiteering act,1958” was replaced

by newer regulatory frameworks in India i.e., GST Act.
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LEGAL PROVISIONS
SECTION 171(1) of CGST Act, 2017.- ANTI-PROFITEERING MEASURE
(1) Any reduction in rate of tax on any supply of goods or services or the benefit of input credit shall be passed on to the recipient
by way of commensurate reduction in prices.

(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 cases coming under the purview of Sec 171(1)
of the Act.
(3) The authority referred to in sub-section (2) shall exercise such powers and discharges such function as may be prescribed.
(3-A)Penalty of profiteering 10% of the amount so profiteered as determined by the Authority. No penalty in case the profiteered
amount is deposited within 30 days of the Order.
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THE AUTHORITY

NATIONAL ANTI-PROFITEERING
AUTHORITTY

STANDING COMMITTEE
ON ANTI-PROFITEERING

STATELEVEL SCREENING
COMMITTEE
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THE AUTHORITY
Chapter XV of the CGST Rules, 2017 (Rules 122 to Rule 137)-

122. Constitution of the Authority.-The Authority shall consist of,- (a) a Chairman who holds or has held a
post equivalent in rank to a Secretary to the Government of India; and
(b) four Technical Members who are or have been Commissioners of State tax or central tax [for at least one
year]262 or have held an equivalent post under the existing law, to be nominated by the Council.

123. Constitution of the Standing Committee and Screening Committees.-(1)The Council may constitute
a Standing Committee on Anti-profiteering which shall consist of such officers of the State Government
and Central Government as may be nominated by it.
(2) A State level Screening Committee shall be constituted in each State by the State Governments which
shall consist of-
(a) one officer of the State Government, to be nominated by the Commissioner, and
(b) one officer of the Central Government, to be nominated by the Chief Commissioner.
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126. Power to determine the methodology and procedure.-The Authority may determine the methodology
and procedure for determination as to whether the reduction in the rate of tax on the supply of goods or
services or the benefit of input tax credit has been passed on by the registered person to the recipient by way
of commensurate reduction in prices.

127. Duties of the Authority.-

• To determine whether any reduction in rate of tax on any supply or the benefit of input tax credit has been
passed to the recipient by way of commensurate reduction in prices
• To identify the registered person who has not pass the benefit to the recipient
• To order (a) reduction in prices,
(b) Return to the recipients the amount equivalent to the amount not passed on by way of commensurate
reduction in prices along with interest rate of 18% from the date of collection of higher price and in case eligible
person does not claim return or not identifiable and depositing the same amount in the fund referred in section
57.
( c) Imposition of penalty; and
(d) Cancellation of registeration.
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128. Examination of application by the Standing Committee and Screening Committee.-

(1) The standing committee shall within period of two months from the date of receipt of the 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 input tax credit has not been passed on to the recipient by way of commensurate reduction in prices.
(2) All applications from interested parties, shall first be examined by the State level Screening Committee and the
Screening Committee shall, within two months from the date of receipt of a written application upon being satisfied
that the supplier has contravened the provisions of section 171, forward the application with its recommendations to
the Standing Committee for further action.

129. Initiation and conduct of proceedings-

(1)Where the Standing Committee is satisfied that there is a prima-facie evidence to show that the supplier has not passed
the benefits, it shall refer the matter to the Director General of [Anti-profiteering]275for a detailed investigation.
(2)The Director General of [Anti-profiteering] shall conduct investigation and collect evidence necessary.
(3) The Director General of [Anti-profiteering] shall, before initiation of the investigation, issue a notice to the interested
parties.
(5)The Director General of [Anti-profiteering]279shall make available the evidence presented to it by one
interested party to the other interested parties, participating in the proceedings.
(6)The Director General of [Anti-profiteering]shall complete the investigation within a period of [six]months of the
receipt of the reference from the Standing Committee and, upon completion of the investigation, furnish to the
Authority, a report of its findings along with the relevant records.
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130. Confidentiality of information.-(1)Notwithstanding anything contained in sub-rules (3) and (5) of rule 129 and sub-
rule (2) of rule 133, the provisions of section 11 of the Right to Information Act, 2005 (22 of 2005), shall apply mutatis
mutandis to the disclosure of any information which is provided on a confidential basis.

131. Cooperation with other agencies or statutory authorities.-Where the Director General of [Anti-
profiteering]285deems fit, he may seek opinion of any other agency or statutory authorities in the discharge of
his duties.

132. Power to summon persons to give evidence and produce documents.

133. Order of the Authority.-(1) The Authority shall, within a period of [six]288months from the date of the receipt of the report
from the Director General of [Anti-profiteering]289 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.
(2) An opportunity of hearing shall be granted to the interested parties by the Authority where any request is received in writing from
such interested parties.
(3) The authority may order,
(a) reduction in prices;
(b) return to the recipient,
(c) If not claimed the fifty percent amount is deposited in fund constituted in section 57 of CGST Act.
(d) imposition of penalty as specified under the Act; and
(e) cancellation of registration under the Act.
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134. Decision to be taken by the majority.-

(1)A minimum of three members of the Authority shall constitute quorum at its meetings.
(2) If the Members of the Authority differ in their opinion on any point, the point shall be decided according to
the opinion of the majority of the members present and voting, and in the event of equality of votes, the
Chairman shall have the second or casting vote.

135. Compliance by the registered person.-Any order passed by the Authority under these rules 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 Integrated Goods and Services Tax Act or the Central Goods and
Services Tax Act or the Union territory Goods and Services Tax Act or the State Goods and Services Tax Act of
the respective States, as the case may be.

136. Monitoring of the order.-The Authority may require any authority of central tax, State tax or Union
territory tax to monitor the implementation of the order passed by it.

137. Tenure of Authority.-The Authority shall cease to exist after the expiry of [four years] from the date on
which the Chairman enters upon his office unless the Council recommends otherwise.
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POWER OF NAPA ORDER

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How to file a complaint:

Online: www.naa.gov.in

Helpline: 011-21400643 (on working days)

Email: [email protected] (for National level complaints),

[email protected] (NAA), for state screening committees, please refer
to the website

Physical: Directorate General of Anti-profiteering, Dept. of Revenue,

Ministry of Finance, 2nd floor, Bhai Veer Singh sahitya Sadan, Bhai Veer
Singh Marg, Gole market, New Delhi-110 001
.• National Anti-profiteering Authority, Dept. of Revenue, Ministry of
Finance, 6th Floor, Tower One, Jeevan Bharati, Connaught Place, New
Delhi-110 001.
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LANDMARK DECISIONS
Reckitt Benckiser India Pvt. Ltd v. Union of India (2024)…..
(2024 SCC OnLine Del 588)
Facts:
Reckitt Benckiser, a major pharmaceutical and consumer goods company, filed a writ petition in the
Delhi High Court challenging the anti-profiteering provisions under the Goods and Services Tax
(GST) Act. The company's products were subjected to these provisions, which mandate businesses to
pass on the benefits of reduced tax rates to consumers. The petitioner argued that the provisions were
arbitrary and unclear, leading to unfair penalties despite compliance with tax laws.
Issues:
1. Whether the anti-profiteering provisions under the GST law were constitutionally valid.
2. Whether the imposition of penalties on Reckitt Benckiser for alleged profiteering was satisfied.
3. Whether there was sufficient clarity in the method used by authorities to calculate and impose anti-
profiteering penalties.
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Judgement;
In Reckitt Benckiser India Pvt. Ltd. v. Union of India (2024), the Delhi High Court upheld the validity of the
anti-profiteering provisions under the GST law. The court ruled that these provisions were constitutionally
sound and aligned with the goal of protecting consumers by ensuring that businesses pass on tax reduction
benefits. Reckitt Benckiser's argument that the provisions were arbitrary and unclear was dismissed. The
court emphasized that the anti-profiteering laws were in place to prevent companies from unjustly
profiting during tax changes, rejecting Reckitt Benckiser's challenge to the penalties imposed.
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Issues and challenges:

1.Computational Mechanism.
2. Determination of Price.
3. Administrative burden.
4. Delayed action.
5. Disputes over profit margin.
6. Impact on Business Pricing Strategies.
7. Lack of consumer awareness.
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Agenda for 53rd GST Council Meeting

Agenda Item 3 (iii) : Law Amendment regarding GST Appellate Tribunal. (a) providing for sunset
clause for Anti-Profiteering provisions under the GST laws and the handling of Anti-Profiteering
cases under Section 171 of the Central Goods and Services Act, 2017 by Appellate Tribunal.
• To amend the Section 171 of the CGST Act by inserting a proviso to sub-section (2) of the said
section to provide for power to the Government to notify the date from which the Authority under
section 171 of the CGST Act will not accept any request for examination as to 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.
• To insert an Explanation in the said sub-section that “request for examination” in the said proviso
means the written application filed by an applicant for such examination.
• To issue a notification specifying 1st April 2025 as the said date under proviso to the said sub-
section.
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CONCLUSION:
From consumers' point of view Anti Profiteering
Provision is necessarily required to be there so as to
ensure deserving benefit is passed on to them. At the
same time, looking at the issues and challenges
before industry and the efforts involved in reworking
of cost sheet and re-fixing of prices, it is advisable
that.
(a)A reasonable bandwidth for margin variation
should be prescribed, say for example variation
upto 10% of existing margins. If variation remains
within such bandwidth, no registered person
should face any penal consequences u/s 171 of the
CGST Act.
(b)A threshold limit for turnover of taxable supplies
may be prescribed, below which provision of sec.
171 shall not apply.
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THANK YOU

PRESENTED BY-
PRAKYATH RRAM
6TH SEM BBALLB,
RV INSTITUTE OF LEGAL STUDIES
PHONE NO.: 8431070919
MAIL: [email protected]