GST ITC Benefits Must Be Passed On Regardless of Amount: GSTAT Orders ₹40,096 Refund among 1,865 Homebuyers [Read Order]

The Principal Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) at Delhi recently directed a realtor to refund profiteered input tax credit (ITC) amount of ₹40,096 along with applicable interest among 1,865 eligible homebuyers, after confirming that the developer had contravened the anti-profiteering provisions under Section 171 of the Central Goods and Services Tax Act, 2017.

The GSTAT ruling came against an appeal filed by the Director General of Anti-Profiteering (DGAP) against the respondent developer -Pan Realtors Pvt. Ltd..

One of the homebuyers who had purchased a property from the realtor raised a complaint before the Standing Committee on Anti-Profiteering alleging that the realtor had failed to pass on ITC benefit by way of commensurate reduction in prices in respect of construction services supplied in its residential project “PAN Oasis”, located at Sector 70, Noida.

Being certain of a prima facie case, the Standing Committee referred the matter to the DGAP for investigation.

The DGAP conducted its investigation in light of the principles laid down by the Delhi High Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India (2024) and concluded that the respondent had derived a marginal additional benefit of input tax credit after the introduction of GST and had not passed on the same to eligible homebuyers.

It was affirmed that 219 units sold after the issuance of the Occupancy Certificate were outside the scope of the present investigation, being exempt supplies in terms of the relevant provisions of the Central Goods and Services Tax Act, 2017.

The DGAP investigation revealed that the ITC availed by the respondent in the pre-GST and post-GST periods for the PAN Oasis project varied. The ratio of input tax credit to the purchase value of goods and services stood at 8.088% in the pre-GST period while it was computed at 8.097% in the post-GST period, reflecting only a marginal increase of 0.009% after the introduction of GST.

Using an area-based methodology to calculate incremental benefit for real estate projects, the DGAP determined the realtor had accrued a total savings of ₹46,507 during the relevant post-GST period, which translated to a base profiteered amount of ₹35,800, to which GST of ₹4,296 was added, aggregating to a total profiteered amount of ₹40,096 required to be passed on to eligible homebuyers.

During the proceedings before the GSTAT, the realtor, through their advocate Mudiet Mishra furnished written submissions accepting the findings recorded in the DGAP report and tendered a Demand Draft of ₹40,096 towards substantial compliance of the amount determined under the DGAP Report.

Technical Member Anil Kumar Gupta observed that the investigation and subsequent report had been prepared as per the verified Statutory Auditor-certified financial statements, and the mathematical computations which remained uncontested by the respondent and Applicant.

Consequently, the GSTAT directed the respondent to refund the profiteered amount of ₹40,096 along with interest, in terms of Rule 133(3)(b) of the CGST Rules, to the 1,865 eligible homebuyers in proportion to the area of their respective units within 30 days from the date of the order.

The respondent was also directed to file a compliance report before the DGAP and the jurisdictional GST authorities upon completion of the refund distribution.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates