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Section 171(1) of the CGST Act, 2017 requires certain benefits to be passed on to the recipient by a commensurate reduction in prices. Which of the following does it cover? A reduction in the rate…

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Section 171(1) of the CGST Act, 2017 requires certain benefits to be passed on to the recipient by a commensurate reduction in prices. Which of the following does it cover?

  1. A reduction in the rate of tax on the supply.
  2. The benefit of input tax credit.
  3. A fall in the supplier's cost of raw materials.

  1. 1 and 3 only

  2. 1 only

  3. 1, 2 and 3

  4. 1 and 2 only

Answer and explanation

Correct answer: D - 1 and 2 only

Section 171(1) of the CGST Act, 2017 requires any reduction in the rate of tax on a supply, or the benefit of input tax credit, to be passed on to the recipient by a commensurate reduction in prices. It does not reach other falls in the supplier's costs, such as cheaper raw materials, which are a matter of ordinary pricing.

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