GSTAT Principal Bench Holds Additional Input Tax Credit Benefit Under GST Must Be Passed to Homebuyers; Profiteered Amount Refundable With Interest

Background and Complaint
The proceedings before the Principal Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) arose from a complaint alleging that Bengal Shapoorji Housing Development Pvt. Ltd. failed to pass on the benefit of additional Input Tax Credit (ITC) to homebuyers after the introduction of GST, as mandated by Section 171 of the Central Goods and Services Tax Act, 2017. The complaint, filed under Rule 128 of the CGST Rules, pertained to the “Shukhobrishti – Spriha Phase 5 & 6” project.

DGAP Investigation and Findings
The Directorate General of Anti-Profiteering (DGAP) investigated the matter for the period from 01.04.2017 to 30.09.2024. The DGAP found that, post-GST, the ratio of ITC to purchase value increased from 8.25% to 14.00%, resulting in an additional benefit of 5.75% to the Respondent. This benefit, according to the DGAP, should have been passed on to homebuyers by way of a commensurate reduction in prices. The DGAP calculated the total profiteered amount at Rs.1,33,32,208/-, with an additional GST component of Rs.15,99,865/-, aggregating to Rs.1,49,32,073/-, to be refunded to 1,525 eligible homebuyers.

Respondent’s Submissions
The Respondent argued that unit prices were fixed at the project’s inception and could not be revised, and that the cost of construction had actually increased post-GST due to higher input tax rates. It was further contended that only utilized ITC should be considered a benefit, and that unutilized ITC, resulting from an inverted duty structure, did not reduce costs or constitute a real benefit under Section 171.

DGAP and Complainant’s Rebuttal
The DGAP maintained that the methodology for determining profiteering was consistent with judicial precedent, specifically a Delhi High Court judgment, and that the benefit of ITC must be computed for the project as a whole and apportioned per square foot. The Complainant raised additional issues regarding the applicable tax regime for affordable housing, alleged excess collection of taxes, and sought broader application of ITC benefits across all project phases.

Tribunal’s Reasoning and Legal Principle
The GSTAT Principal Bench held that the benefit under Section 171 is to be computed based on the availability of ITC, not its actual utilization. The Tribunal rejected the Respondent’s arguments regarding the inverted duty structure and fixed pricing, emphasizing that the accrual of additional ITC reduces the cost of supply and must be passed on to buyers. The Tribunal also clarified that the GST component collected on the profiteered amount must be refunded, citing the Delhi High Court’s decision in Reckitt Benckiser India Pvt. Ltd. v. Union of India.

Interest and Penalty
The Tribunal ruled that interest at 18% per annum is mandatorily payable on the profiteered amount from the date of collection until actual refund, as per Rule 133(3)(b) of the CGST Rules. Regarding penalty, the Tribunal noted that Section 171(3A) of the CGST Act, 2017, which provides for a penalty of 10% of the profiteered amount, applies to the period after its commencement on 01.01.2020, and is attracted in this case.

Final Directions
The Respondent was directed to refund the total profiteered amount of Rs.1,49,32,073/-, including GST, to the eligible homebuyers, along with interest at 18% per annum. Compliance is to be reported to the jurisdictional Commissioner and the DGAP within three months. The order was pronounced in open court and copies directed to all relevant parties.

This decision reinforces the statutory obligation of developers to pass on the benefit of additional ITC under GST to homebuyers, and clarifies the computation and refund mechanism for profiteered amounts under anti-profiteering provisions.