GSTAT Principal Bench Holds No Anti-Profiteering Violation Where Entire Construction and Sale Occurred Post-GST Regime

Background and Context
The proceedings before the GST Appellate Tribunal (GSTAT) Principal Bench arose from an application alleging profiteering by Arun Excello Constructions LLP under Section 171 of the Central Goods and Services Tax Act, 2017 (CGST Act). The applicant contended that the benefit of input tax credit (ITC) was not passed on through a commensurate reduction in the price of a flat purchased in the respondent’s residential project, “Compact Homes–Narmada.” The project comprised 336 residential units, all booked prior to completion, with the relevant period of investigation spanning from April 2017 to September 2024.

DGAP Investigation and Findings
The Director General of Anti-Profiteering (DGAP) investigated the complaint, focusing on whether the respondent had passed on the benefit of ITC to homebuyers as mandated by Section 171 of the CGST Act. The DGAP’s report, dated 28 February 2025, concluded that the ratio of credit availed to purchase value actually declined marginally from 14.50% in the pre-GST regime to 14.28% post-GST, resulting in a negative difference of 0.22%. The DGAP thus found no incremental benefit to be passed on and opined that there was no contravention of Section 171.

Objections and Submissions
The applicant objected to the DGAP’s findings, arguing that the respondent misrepresented the stage of construction and charged an excessive GST rate, failing to pass on ITC benefits. The applicant also claimed that the respondent should have applied the concessional 1% GST rate for affordable housing, introduced by Notification No. 3/2019-Central Tax (Rate) effective from 1 April 2019. The respondent countered that all construction and sale activities occurred after the implementation of GST, with all necessary approvals obtained post-GST. The respondent further argued that the concessional rate was not applicable during the relevant period and that the applicant had previously raised similar claims before the Tamil Nadu Real Estate Regulatory Authority (TNRERA), which were rejected.

Tribunal’s Legal Reasoning
The Tribunal examined Section 171 of the CGST Act and relevant judicial precedents, including the Delhi High Court’s decision in Reckitt Benckiser India Pvt. Ltd. v. UOI. The Tribunal emphasized that anti-profiteering provisions apply primarily to situations involving a reduction in tax rate or an increase in ITC, particularly for projects spanning both pre- and post-GST periods. Citing paragraph 128(d) of the Reckitt Benckiser judgment, the Tribunal clarified that where both construction and sale occur entirely in the post-GST regime, no benefit of ITC is required to be passed on, as the price would already reflect the available ITC.

The Tribunal also referred to its own prior decisions, including DGAP vs. Sobha Limited and DGAP v. Pyramid Infratech Pvt. Ltd., reiterating that Section 171 does not apply where the entire project is executed post-GST, as there is no comparative ITC benefit to be passed on.

Decision and Outcome
Upon review of the DGAP report, the parties’ submissions, and the applicable legal framework, the Tribunal found that the applicant’s objections lacked substance. The Tribunal accepted the DGAP’s methodology and findings, holding that the respondent had not engaged in profiteering under Section 171 of the CGST Act. The Tribunal further clarified that the concessional 1% GST rate for affordable housing, introduced after the relevant period, was not applicable to the applicant’s case.

Accordingly, the Tribunal rejected the applicant’s objections and accepted the DGAP’s report, directing that a copy of the judgment be sent to the concerned CGST/SGST authorities for any necessary action.

Judgment pronounced by Justice Mayank Kumar Jain, Judicial Member, on 4 June 2026.