Explanation:

In the GST mechanism, the producers are provided an input tax credit. It works this way. Suppose, a producer requires INR 80 worth of cotton to produce a shirt, which is finally processed and priced at INR 100 in the market. In this process, the producer will have to pay taxes at two places – a) while purchasing the raw material,  and b) while selling the final produce – shirt. This double taxation (tax on tax) is avoided by an input tax credit mechanism. Under this, the producers are compensated for any additional taxes they would have paid. When constituted by the GST Council, the National Anti-profiteering Authority shall be responsible for applying anti- profiteering measures in the event of a reduction in rate of GST on supply of goods or services. It will also check if the benefit of input tax credit is not passed on to the recipients by way of commensurate reduction in prices. In the event the National Anti-profiteering Authority confirms the necessity of applying anti-profiteering measures, it has the power to order the business concerned to reduce its prices or return the undue benefit availed along with interest to the recipient of the goods or services.

• If the undue benefit cannot be passed on to the recipient, it can be ordered to be deposited in the Consumer Welfare Fund.
• In extreme cases the National Anti-profiteering Authority can impose a penalty on the defaulting business entity and even order the cancellation of its registration under GST.