GSTAT Upholds Anti-Profiteering Demand Against Builder
for Failure to Pass on ITC Benefits to Homebuyers
Summary of
the Case
The Goods and Services
Tax Appellate Tribunal (GSTAT) has upheld the anti-profiteering demand against
Vasavi and GP Infra LLP for failing to pass on the full benefit of additional
Input Tax Credit (ITC) to homebuyers after the introduction of GST. The Tribunal
directed the builder to return ₹71,37,747 as the remaining profiteered amount,
along with GST of ₹8,56,530 and interest at 18% per annum. The total amount
payable, excluding interest, comes to ₹79,94,277.
Background
and Facts
The case arose from
complaints filed by homebuyers of the residential project “Vasavi GP Trends”
in Telangana. The complainants alleged that the builder had not passed on the
benefit of additional ITC available under the GST regime through a
corresponding reduction in the prices of flats, as required under Section 171
of the CGST Act, 2017.
The matter was
investigated by the Directorate General of Anti-Profiteering (DGAP). In its
original report dated 9 October 2024, the DGAP calculated the profiteered
amount at ₹6,02,89,656, excluding GST. After considering the benefit already
passed on to buyers, the remaining amount was calculated at ₹2,54,20,175.
The GSTAT subsequently
directed the DGAP to re-examine certain aspects of the calculation, including
the methodology used, the treatment of ITC on input services, the benefit
allegedly passed on to certain customers, and the pricing of flats sold after the
introduction of GST.
Following this
re-examination, the DGAP submitted a revised report dated 13 March 2026. The
revised calculation determined the total profiteered amount at ₹1,51,87,625,
out of which ₹71,37,747 remained to be passed on to eligible homebuyers.
Key Issues
Before the Tribunal
The principal issues
before the Tribunal were:
1. Whether
the builder had received an additional ITC benefit after the introduction of
GST.
2. Whether
the benefit had been fully passed on to homebuyers through a proportionate
reduction in prices.
3. Whether
GST and interest were payable on the remaining profiteered amount.
4. Whether
a penalty was applicable under Section 171(3A) of the CGST Act, 2017.
Findings of
the GSTAT
1. ITC Benefit Must Be
Passed on to Homebuyers
The Tribunal observed
that the introduction of GST allowed builders to claim ITC on both goods and
input services, unlike the earlier indirect tax regime, where credit was
restricted. The additional benefit arising from this change was required to be
passed on to homebuyers through a commensurate reduction in prices under
Section 171 of the CGST Act, 2017.
The Tribunal rejected the
builder’s argument that ITC relating to input services should be excluded from
the calculation. It held that the benefit of ITC under GST includes both goods
and services.
2. Documentary Evidence
Can Establish That the Benefit Was Passed On
An important aspect of
the case concerned 13 customers who had denied receiving the ITC benefit
through email responses. The Tribunal observed that such responses could not,
by themselves, override the documentary evidence maintained in the ordinary
course of business.
The DGAP had examined the
builder’s books of accounts, customer ledgers and credit notes and found that
the benefit had been adjusted against the amounts payable by the customers. The
Tribunal accepted that reducing the amount payable by a customer can constitute
a valid method of passing on the benefit. A separate cash refund is not always
necessary.
Accordingly, the Tribunal
recognised that the benefit of ₹46,40,136 had been passed on to the concerned
13 customers.
3. Benefit Included in
the Sale Price Must Be Considered
The Tribunal also noted
that the builder had produced contemporaneous records, including internal
circulars and meeting minutes, indicating that the anticipated ITC benefit had
been considered while fixing the prices of flats after GST was introduced.
However, after examining
the revised DGAP report and the supporting records, the Tribunal concluded that
the builder had still failed to pass on the entire benefit. It upheld the
revised outstanding profiteered amount of ₹71,37,747.
The Tribunal further
clarified that any excess benefit passed on to certain buyers could not be
adjusted against the shortfall relating to other buyers, as each eligible
recipient was independently entitled to the benefit.
4. GST Is Payable on the
Profiteered Amount
The builder argued that
it had already deposited GST with the Government on the amounts collected from
buyers and that imposing GST again would result in double recovery.
The Tribunal rejected
this argument. It held that the excess amount collected from buyers included
the corresponding GST component and that the entire excess realisation had to
be returned.
Accordingly, GST at 12%,
amounting to ₹8,56,530, was required to be added to the profiteered amount of
₹71,37,747.
5. Interest at 18% Per
Annum Is Payable
The Tribunal held that
Rule 133(3)(b) of the CGST Rules, 2017 requires the amount not passed on to
recipients to be returned along with interest at 18% per annum. Interest is
payable from the respective dates on which the higher amounts were collected from
the buyers until the actual return of those amounts.
The Tribunal observed
that interest serves a compensatory purpose by accounting for the time during
which the money rightfully belonging to the recipients remained with the
builder.
6. Penalty Under Section
171(3A)
The Tribunal also
considered the applicability of penalty under Section 171(3A) of the CGST Act,
2017. It observed that the provision came into force on 1 January 2020, while
the period of alleged contravention extended from 1 July 2017 to 30 September 2024.
Since the period included the time after the provision came into force, the
Tribunal held that the penalty provision was attracted in the facts of the
case.
Final
Decision
The GSTAT directed Vasavi
and GP Infra LLP to pass on the following amounts to the eligible homebuyers
identified in the DGAP report dated 13 March 2026:
|
Particulars
|
Amount
|
|
Remaining
profiteered amount
|
₹71,37,747
|
|
GST
at 12%
|
₹8,56,530
|
|
Total,
excluding interest
|
₹79,94,277
|
|
Interest
|
18%
per annum, as applicable
|
The builder was directed
to complete compliance within three months from the date of the order and
report compliance to the jurisdictional Commissioner, with a copy to the DGAP.
Conclusion
This decision highlights
the importance of passing on the benefit of additional ITC to homebuyers
through a commensurate reduction in prices. It also clarifies that the benefit
may be established through reliable financial records, customer ledgers and credit
notes, rather than only through a separate cash refund.
The ruling further
emphasises that the calculation of profiteering must take account of relevant
supporting documents and that the benefit must be assessed recipient-wise. At
the same time, any remaining amount found to have been collected in excess must
be returned along with the applicable GST and interest in accordance with the
law.
Disclaimer: All the Information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
Click here
