Wai Wai Noodles Maker: Ordered to Pay ₹90.9 Lakh GST.

The GST Payment and Tax Evasion mechanisms are crucial in ensuring that businesses pass on the benefits of tax reductions to consumers, as evident in the recent ruling by the Goods and Services Tax Appellate Tribunal (GSTAT), Delhi, which upheld findings of profiteering against instant noodle manufacturer C.G. Foods. The Tribunal’s order dated 03 February 2026, highlights the importance of complying with Section 171 of the CGST Act, 2017, which mandates that businesses reduce prices commensurately when tax rates are cut, to prevent Tax Evasion through GST Payment manipulation.

Key Facts

• Date of GST rate reduction: November 15, 2017
• Date of end of profiteering period: December 31, 2018
• GST rate reduction: from 18% to 12% on instant noodles (HSN 1902)
• Amount of profiteering: ₹90.9 lakh
• Tribunal’s order date: 03 February 2026
• Relevant Section: Section 171 of the CGST Act, 2017
• Case: C.G. Foods vs. DGAP
• Relevant court ruling: Reckitt Benckiser India Pvt Ltd v. UOI

Statutory Context & Tax Analysis

Section 171 of the CGST Act, 2017, is a crucial provision that aims to prevent businesses from profiteering by increasing base prices despite a reduction in tax rates. This section mandates that any reduction in tax rates shall be passed on to the consumers through a commensurate reduction in prices. The CGST Act, 2017, also provides for the establishment of the National Anti-Profiteering Authority (NAA) to investigate cases of profiteering and to ensure that businesses comply with Section 171. In the case of C.G. Foods, the Tribunal relied on the Delhi High Court’s ruling in Reckitt Benckiser India Pvt Ltd v. UOI, which emphasized the importance of businesses providing a cogent basis for increasing base prices despite a reduction in tax rates. The Tribunal’s ruling highlights the need for businesses to maintain accurate records of their pricing and cost structures to demonstrate compliance with Section 171.

Client Impact & Compliance Procedure

The ruling in C.G. Foods vs. DGAP has significant implications for businesses that have benefited from tax rate reductions. To avoid profiteering charges, businesses must ensure that they reduce their prices commensurately when tax rates are cut. The following steps can be taken to comply with Section 171:

1. Maintain accurate records of pricing and cost structures to demonstrate compliance with Section 171.
2. Conduct regular reviews of pricing to ensure that it is commensurate with the reduced tax rate.
3. File Form GST CMP-02 to report any reduction in tax rates and the corresponding reduction in prices.
4. Maintain records of all invoices and receipts to demonstrate that the benefit of the tax reduction has been passed on to consumers.
5. Ensure that the maximum retail price (MRP) is not increased during the period of tax rate reduction.
   By following these steps, businesses can ensure that they are complying with Section 171 and avoiding potential profiteering charges. It is also essential to note that the Tribunal’s ruling emphasizes the importance of providing a cogent basis for increasing base prices despite a reduction in tax rates. Businesses must be prepared to justify any price increases and demonstrate that they are not profiteering from tax rate reductions. The GST Council has also emphasized the need for businesses to comply with Section 171, and non-compliance can result in penalties and fines. Therefore, it is crucial for businesses to take proactive steps to ensure compliance with this provision and avoid any potential consequences.

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