Developer must return Rs. 2.6 crore to homebuyers for not passing GST Input Tax Credit benefit under Section 171

NAPA held that respondent developer contravened Section 171 of CGST Act by failing to pass on additional Input Tax Credit benefit of 3.07% to 736 homebuyers in Project Suncity Avenue-102. Authority determined profiteering amount of Rs. 2,62,56,652 must be returned to recipients with 18% interest from profiteering date. Respondent directed to reduce flat prices commensurate with ITC benefit received. However, penalty under Section 171(3A) could not be imposed retrospectively as provision was inserted after violation period (01.07.2017 to 08.08.2019). Application disposed of within prescribed limitation period.

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Issues:
1. Non-compliance with Section 171 of the CGST Act, 2017.
2. Calculation and passing of Input Tax Credit (ITC) benefits.
3. Profiteering amount determination.
4. Compliance with anti-profiteering measures.
5. Penalty imposition under Section 171 (3A) of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Non-compliance with Section 171 of the CGST Act, 2017:
The judgment addresses the issue of non-compliance with Section 171 of the CGST Act, 2017, which mandates the passing of benefits of ITC to recipients by way of commensurate reduction in prices. The Authority found that the Respondent failed to pass on the ITC benefits accrued post-GST implementation, amounting to 3.07% of the turnover, to the homebuyers, thus contravening Section 171.

2. Calculation and Passing of ITC Benefits:
The DGAP's investigation revealed discrepancies in the calculation of the ITC benefits. Initially, the area of commercial shop units was not considered, leading to incorrect profiteering calculations. The revised report considered the total area, including commercial shop units, and recalculated the ITC benefits and profiteered amount. The Respondent claimed to have passed on Rs. 2,67,88,794/- to 736 homebuyers, but the DGAP identified that an additional Rs. 6,69,578/- was still due to 20 homebuyers.

3. Profiteering Amount Determination:
The DGAP determined the total profiteered amount to be Rs. 2,62,56,652/-, including GST. This was based on the additional ITC of 3.07% of the turnover that should have resulted in a commensurate reduction in the base price. The Respondent's claim of passing on Rs. 2,67,88,794/- was acknowledged, but the DGAP highlighted that some homebuyers received excess benefits while others did not receive the required amount.

4. Compliance with Anti-profiteering Measures:
The judgment emphasizes the need for compliance with anti-profiteering measures under the CGST Act. The Authority directed the Respondent to reduce the prices commensurate with the ITC benefits received and pass on the determined profiteered amount to the homebuyers along with 18% interest from the date of profiteering until the date of payment. The jurisdictional CGST/SGST Commissioner was tasked with ensuring compliance and submitting a report within four months.

5. Penalty Imposition under Section 171 (3A) of the CGST Act, 2017:
The Authority acknowledged that the penalty provisions under Section 171 (3A) were not applicable retrospectively as they were inserted w.e.f. 01.01.2020, while the violation occurred between 01.07.2017 and 08.08.2019. Consequently, no penalty was imposed on the Respondent for the said period.

Conclusion:
The judgment concluded that the Respondent had contravened Section 171 of the CGST Act by not passing on the ITC benefits commensurately. The Respondent was ordered to pass on the profiteered amount of Rs. 2,62,56,652/- along with interest to the homebuyers. The jurisdictional CGST/SGST Commissioner was directed to ensure compliance and publish an advertisement to inform homebuyers about the order and their entitlement. The penalty provisions under Section 171 (3A) were deemed inapplicable for the period in question.

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