GSTAT Principal Bench Holds Developer Liable for Interest on Profiteered Amount Under Section 171 of CGST Act

Background and Proceedings
The case arose from a complaint by a homebuyer alleging that Nandi Infratech Pvt. Ltd. failed to pass on the benefit of Input Tax Credit (ITC) after the introduction of GST, as required under Section 171 of the Central Goods and Services Tax Act, 2017. The Uttar Pradesh State Screening Committee referred the matter to the Director General of Anti-Profiteering (DGAP) for investigation. The DGAP’s initial findings led to an order by the National Anti-Profiteering Authority (NAA) holding the developer guilty of profiteering.

Following the expiry of the NAA’s tenure and a remand by the Competition Commission of India (CCI) in light of the Delhi High Court’s decision in Reckitt Benckiser India Pvt. Ltd. v. Union of India, the DGAP re-investigated the matter. The DGAP’s report dated 09.01.2025 concluded that while the developer had passed on some ITC benefits to homebuyers, a shortfall of Rs. 14,79,117 remained to be disbursed.

DGAP’s Findings
The DGAP’s methodology involved comparing the ratio of credit availed to the purchase value of goods and services in the pre- and post-GST periods. The investigation found that for units booked in the pre-GST period, the benefit of additional ITC had not been fully passed on to all eligible homebuyers. The DGAP also clarified that excess benefit passed to some buyers could not offset the shortfall to others, as each buyer is entitled to the commensurate benefit.

Respondent’s Submissions
The developer challenged the DGAP’s methodology, arguing that ITC is a statutory set-off rather than a commercial gain, and that the calculations failed to account for inflation, cost escalation, and stage-wise construction. The developer also contended that the DGAP did not properly verify ITC reversals or normalize the comparison periods. Despite these objections, the developer ultimately agreed to accept the DGAP’s report “without prejudice” to bring closure to the long-pending dispute.

Tribunal’s Reasoning and Decision
The GST Appellate Tribunal (GSTAT) Principal Bench considered the objections and submissions from all parties, including affidavits from various homebuyers. The Tribunal noted that the main issue before it was whether the developer had contravened Section 171 by not passing on the full benefit of ITC. The Tribunal found that the DGAP’s report was supported by documentary evidence and that the developer’s acceptance of the report further justified its adoption.

The Tribunal specifically held that the benefit of ITC must be passed on to each eligible homebuyer individually, and excess benefit to some cannot compensate for shortfalls to others. The Tribunal also clarified that issues relating to interest claims by individual buyers for delayed refunds or cancellations fall outside the scope of Section 171 and must be pursued before the appropriate forum.

Final Order
The Tribunal accepted the DGAP’s report dated 09.01.2025 and held that the developer had indulged in profiteering in violation of Section 171 of the CGST Act. The Tribunal ordered the developer to pay interest at 18% on the profiteered amount from the date of collection until the date of return, as mandated by Rule 133(3)(b) of the CGST Rules, 2017. The judgment was directed to be communicated to the relevant tax authorities for necessary action.

This decision reinforces the statutory obligation of developers to pass on the benefit of ITC to homebuyers and clarifies the consequences of non-compliance under the anti-profiteering provisions of the GST regime.