GSTAT Principal Bench Holds No ITC Benefit Pass-Through Required Where Entire Construction and Sale Occur Post-GST Regime

Background and Context
The proceedings before the GST Appellate Tribunal (GSTAT) Principal Bench arose from a complaint alleging that Sobha Ltd. failed to pass on the benefit of input tax credit (ITC) following the introduction of GST, as mandated by Section 171 of the Central Goods and Services Tax Act, 2017. The complainants, who had purchased a unit in the respondent’s project, claimed that the benefit of ITC was not reflected in the price of their flat.

The Standing Committee on Anti-Profiteering, upon prima facie satisfaction, referred the matter to the Director General of Anti-Profiteering (DGAP) for investigation. The DGAP’s investigation revealed that the ratio of credit availed to purchase value actually declined post-GST (from 12.26% to 11.02%), indicating no incremental benefit to the respondent. Accordingly, the DGAP concluded that there was no contravention of Section 171.

Proceedings Before the Tribunal
During the GSTAT proceedings, the complainants sought access to records and challenged the DGAP’s findings. The respondent, Sobha Ltd., raised preliminary objections, arguing that the entire transaction—including booking, agreement, construction, and payment—occurred after the introduction of GST. They contended that the price was fixed after factoring in the available ITC, and thus, no further benefit was required to be passed on. The respondent relied heavily on the Delhi High Court’s decision in Reckitt Benckiser India Pvt. Ltd. v. UOI, particularly paragraph 128(d), which clarifies that no ITC benefit needs to be passed on when both construction and sale are post-GST.

The complainants countered that the property was under construction at the time of booking and that the payment schedule was linked to construction milestones. They argued that Section 171 remained applicable and that the respondent bore the burden of demonstrating compliance.

Tribunal’s Reasoning and Legal Principle
The Tribunal carefully analyzed the Delhi High Court’s judgment in Reckitt Benckiser, emphasizing that paragraph 128(d) applies where both construction and purchase occur in the post-GST period. The Tribunal clarified that the expressions “constructed in the post-GST period” and “after making upfront payment” do not require the property to be fully constructed at the time of agreement or payment to be made in a single lump sum. Rather, what is crucial is that all activities—from booking to construction and payment—take place after GST implementation.

In the present case, the Tribunal found that all relevant events, including booking, agreement execution, construction, and payment, occurred after 1 July 2017, the effective date of GST. The price was determined after considering the ITC available under GST, and the complainants accepted this price without objection at the time of agreement.

The Tribunal also cited its own previous decision in DGAP v. Pyramid Infratech Pvt. Ltd., reiterating that Section 171 applies primarily to projects spanning both pre- and post-GST periods, and not to those wholly within the post-GST regime.

Final Decision
Accepting the respondent’s preliminary objections, the Tribunal held that the case was fully covered by the legal principle set out in paragraph 128(d) of the Delhi High Court’s judgment. As the entire transaction occurred post-GST, no ITC benefit was required to be passed on to the complainants. The DGAP’s report, which found no contravention of Section 171, was accepted. All objections by the complainants were rejected, and the matter was disposed of accordingly.

This decision reinforces the principle that in cases where both construction and sale are entirely post-GST, the statutory anti-profiteering provisions do not mandate any further pass-through of ITC benefits to buyers, as the pricing already reflects the available credits.