IndiaAudit Lens

Rule 127 of the CGST Rules, 2017

From the IndiaAuditLens Law Library

GST›CGST Rules, 2017›Chapter XV, Anti-Profiteering

At a glance

Bars, duties and time limits

127(i)–(ii)The Authority determines whether a tax-rate reduction or input tax credit benefit was passed on through commensurate price reductions and identifies the registered person who did not pass it on.
127(iii)(c)–(iv)The functions include ordering penalties specified in the Act and cancellation of registration under the Act. A performance report must reach the Council by the tenth day after each quarter closes.

Procedure, powers and definitions

127(iii)(a)–(b)The Authority can order price reductions and return of the benefit not passed on, with eighteen per cent interest from collection of the higher amount until return. Where the eligible person does not claim it or cannot be identified, the specified recovery and deposit route leads to the Fund under section 57.
127The law does not settle the supply or recipient level and period for testing commensurate reduction, or the time basis, day-count denominator and rounding for the interest calculation.

Rule 127 sets out the Authority’s anti-profiteering functions: testing whether tax or credit benefits reached recipients, identifying the registered person concerned and ordering the specified remedies. It also requires quarterly reporting to the Council. Exercise of these functions depends on the applicable jurisdiction, including the separate bar on accepting new examination requests from 1 April 2025.^[1]

Quick facts

Rule 127, CGST Rules, 2017

Functions of the Authority

Provision
Act	Central Goods and Services Tax Rules, 2017
Chapter	XV, Anti-Profiteering
Rule title	Functions of the Authority
Amendments
Last amendment	1 December 2022: Substituted (w.e.f. 01.12.2022) for "It shall be the duty of the Authority,-" vide Notification No. 24/2022-CT dated 23.11.2022.
Amendments	4 footnotes in the CBIC text (table)
Related provisions
Sections	Section 29 of the CGST Act, 2017, Section 57 of the CGST Act, 2017, Section 171 of the CGST Act, 2017
Structure 127(i)Positive passing-on criterion with recorded determination 127(ii)Identification of person not passing benefit 127(iii)(a)Price reduction direction 127(iii)(b)Return amount and interest direction 127(iii)(b)Unclaimed or unidentifiable recipient Fund route 127(iii)(c)Penalty direction 127(iii)(d)Cancellation direction 127(iv)Quarterly performance report 127(iii)(b)Interest calculation convention 127(i)Authority determination function
Source
Law text	CBIC tax information portal, served on 17 September 2026^[1]

Text

The text below is the rule as served by the CBIC tax information portal on 17 September 2026, with the portal's own amendment footnote markers (shown as small numerals before a bracket) and its footnotes.^[1] The Rules as published in the Gazette of India is the legal source.

Rule 127, verbatim (show)

Rule 127. ³[Functions] of the Authority. -

⁴[The authority shall discharge the following functions, namely:-]

(i) to determine whether any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices;

(ii) to identify the registered person who has Not passed on the benefit of reduction in the rate of tax on supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices;

(iii) to order, (a) reduction in prices;

(b) return to the recipient, an amount equivalent to the amount Not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent. from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount Not returned, as the case may be, in case the eligible person does Not claim return of the amount or is Not identifiable, and depositing the same in the Fund referred to in section 57;

(c) imposition of penalty as specified in the Act; and (d) cancellation of registration under the Act.

¹[(iv) to furnish a performance report to the Council by the tenth ²[day] of the close of each quarter.]

1. Inserted vide Notification No. 34/2017 -CT dated 15.09.2017.

2. Inserted vide Notification No. 14/2018-CT dated 23.03.2018.

3. Substituted (w.e.f. 01.12.2022) for "Duties" vide Notification No. 24/2022-CT dated 23.11.2022.

4. Substituted (w.e.f. 01.12.2022) for "It shall be the duty of the Authority,-" vide Notification No. 24/2022-CT dated 23.11.2022.

Questions to answer on the file

Questions a reviewer answers from the engagement file, grouped by the part of the rule they come from. They describe what the rule asks; they do not decide it.

Positive passing-on criterion with recorded determination 127(i)

Questions to answer on the file6 questions

Which statutory benefit alternative is for this positive passing-on enquiry: tax-rate reduction or input tax credit benefit?
If “tax-rate reduction”: did a tax-rate reduction arise on this supply?
If question 1 is answered “input tax credit benefit”: did an input tax credit benefit arise on this supply?
Was the supply price reduced for its recipient?
Was that reduction commensurate with the benefit?
Did the Authority determine whether the benefit was passed on?

Ticks stay in this browser only.

Identification of person not passing benefit 127(ii)

Questions to answer on the file2 questions

Is the supplier registered?
Did the Authority identify that supplier as not passing on the benefit?

Ticks stay in this browser only.

Price reduction direction 127(iii)(a)

Questions to answer on the file2 questions

Was the direction issued by the Authority?
Does the direction order reduction in prices?

Ticks stay in this browser only.

Return amount and interest direction 127(iii)(b)

Questions to answer on the file8 questions

Does the order direct return to the recipient?
What amount was determined as not passed on?
What principal amount does the order direct to be returned?
What interest percentage does the direction specify?
On what date was the higher amount collected?
On what date does the ordered interest period start?
On what date was the amount returned or recovered in the route?
On what date does the ordered interest period end?

Ticks stay in this browser only.

Unclaimed or unidentifiable recipient Fund route 127(iii)(b)

Questions to answer on the file4 questions

Has the eligible person claimed return of the amount?
Is the eligible person identifiable?
Was the unreturned amount recovered?
Was that recovered amount deposited in the section 57 Fund?

Ticks stay in this browser only.

Penalty direction 127(iii)(c)

Questions to answer on the file2 questions

Did the Authority order the stated penalty?
Does the Act provision authorize this particular penalty on the supplied facts?

Ticks stay in this browser only.

Cancellation direction 127(iii)(d)

Questions to answer on the file2 questions

Did the Authority order the stated cancellation?
Does the Act provision authorize this particular cancellation on the supplied facts?

Ticks stay in this browser only.

Quarterly performance report 127(iv)

Questions to answer on the file4 questions

Was the furnished document a performance report?
Was the report furnished to the Council?
What was the close date of the quarter reported?
On what date was the report furnished?

Ticks stay in this browser only.

Authority determination function 127(i)

Questions to answer on the file2 questions

Was the determination made by the competent Authority?
Did the Authority determine whether the relevant benefit was passed on by commensurate price reduction?

Ticks stay in this browser only.

Amendment history

The CBIC text carries 4 footnotes. The table gives each in the source's own terms. Effective dates are as the footnotes state them.^[1]

Amendments to Rule 127 as footnoted in the CBIC text
Note	Change
1	Inserted vide Notification No. 34/2017 -CT dated 15.09.2017.^[2]
2	Inserted vide Notification No. 14/2018-CT dated 23.03.2018.^[3]
3	Substituted (w.e.f. 01.12.2022) for "Duties" vide Notification No. 24/2022-CT dated 23.11.2022.^[4]
4	Substituted (w.e.f. 01.12.2022) for "It shall be the duty of the Authority,-" vide Notification No. 24/2022-CT dated 23.11.2022.^[4]

Provisions connected to Rule 127
Provision	Connection	Words that tie them
Section 171 of the CGST Act, 2017	this provision requires Section 171 of the CGST Act, 2017	127(i) "commensurate reduction in prices"
Section 57 of the CGST Act, 2017	this provision requires Section 57 of the CGST Act, 2017	127(iii)(b) "Fund referred to in section 57"
Section 29 of the CGST Act, 2017	this provision requires Section 29 of the CGST Act, 2017	127(iii)(d) "cancellation of registration under the Act"

Circulars and notifications

Circulars and notifications in the CBIC repository that cite this rule, newest first, by number, date and subject. A listing here does not say what an instrument decides; read the instrument.

Notifications (3)

Number	Date	Subject
Notification No. 24/2022-Central Tax	23 November 2022	Seeks to make fourth amendment (2022) to CGST Rules with effect from 01.12.2022.
Notification No. 14/2018-Central Tax	23 March 2018	Amending the CGST Rules, 2017(Third Amendment Rules, 2018).
Notification No. 34/2017-Central Tax	15 September 2017	Seventh amendment to the CGST Rules, 2017.

Unsettled questions

The words of Rule 127 do not answer these questions. Where one decides a matter on the file, the answer depends on the position taken on it.

At what supply or recipient level and over what period is commensurate reduction tested?
What time basis, day-count denominator and rounding apply to the eighteen-percent interest in Rules 127 and133 where the rule does not state them?

See also

Section 171 of the CGST Act, 2017: anti-profiteering measure
Section 57 of the CGST Act, 2017: consumer Welfare Fund
Section 29 of the CGST Act, 2017: cancellation or suspension of registration

References

Central Board of Indirect Taxes and Customs. "Rule 127. Functions of the Authority". Central Goods and Services Tax Rules, 2017, CBIC tax information portal, with amendment footnotes 1 to 4. Retrieved 17 September 2026.
Notification No. 34/2017-Central Tax, dated 15 September 2017: Seventh amendment to the CGST Rules, 2017. Cited in CBIC footnote 1.
Notification No. 14/2018-Central Tax, dated 23 March 2018: Amending the CGST Rules, 2017(Third Amendment Rules, 2018). Cited in CBIC footnote 2.
Notification No. 24/2022-Central Tax, dated 23 November 2022: Seeks to make fourth amendment (2022) to CGST Rules with effect from 01.12.2022. Cited in CBIC footnotes 3 and 4.

External links

CGST Rules, 2017, Rule 127 on the CBIC tax information portal