2023 (8) TMI 1353 - CCI - GST

Builder not required to reduce prices as no additional tax benefit gained under Section 171(1) CGST Act 2017

CCI held that Section 171(1) of CGST Act, 2017 was not applicable to respondent's project as no additional ITC benefit accrued during GST period compared ... Profiteering - Respondent had not passed on the benefit of ITC by way of commensurate reduction in the price - violation of provisions of Section 171 (1) of the CGST Act, 2017 - HELD THAT:- The Commission observes that no benefit of additional ITC during the GST period as compared to the pre-GST period has accrued in the case of this Project to the Respondent, which he is obliged to pass on to his buyers. Hence, the provisions of Section 171 of the CGST Act, 2017 are not attracted in this case and there is no requirement of any commensurate reduction in the prices of the units in the said project by the Respondent. Applicant No. 1 could have availed the above benefit only if the above project was under execution/implementation before the date of GST implementation viz., 01.7.2017. Hence, the allegations made by the Applicant No. 1 are incorrect and therefore, the same cannot be accepted. The Commission finds that the provisions of Section 171 (1) of the CGST Act, 2017 are not attracted in the Respondent’s project “Godrej Elements”. Therefore, the proceedings in the present case are hereby dropped. ISSUES PRESENTED AND CONSIDERED 1. Whether additional benefit of input tax credit (ITC) accrued to the supplier in respect of the real estate project that was launched after implementation of GST, such that the supplier was obliged under Section 171(1) of the CGST Act, 2017 to pass on a commensurate reduction in price to buyers. 2. Whether the provisions of Section 171(1) of the CGST Act, 2017 are attracted where all key project events (registration, booking, allotment, commencement of construction, receipt of payments) occurred in the post-GST period, leaving no pre-GST base for comparison. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Existence of additional ITC benefit obliging pass-through under Section 171(1) Legal framework: Section 171(1) of the CGST Act, 2017 requires that where there is a reduction in rate of tax or an increase in the benefit of input tax credit, the supplier must pass on the benefit by way of commensurate reduction in price to the recipient. Precedent Treatment: No prior decisions or judicial precedents were invoked or relied upon in the reasoning; the Commission's decision rests on statutory interpretation and factual chronology. Interpretation and reasoning: The Commission examined documentary evidence - RERA registration, commencement certificate, development permission, first booking/application form, and first tax invoice/demand-cum-allotment - and found that all material events (project launch, bookings, invoicing, construction commencement and receipts) occurred after 01.07.2017 (post-GST). As there was no turnover, demand or payment in the pre-GST period for this project, there was no basis to demonstrate an increase in ITC benefit vis-à-vis a pre-GST baseline. Absent a pre-GST comparator, the statutory trigger (an increase in benefit of ITC relative to pre-GST) could not be satisfied. The supplier had charged GST after availing ITC and had not opted for a specific new scheme, but charging GST post-GST and availing ITC does not, without a pre-GST comparison, create an actionable obligation under Section 171(1). Ratio vs. Obiter: Ratio - Where a project is launched and all relevant transactions occur post-GST implementation, Section 171(1) does not apply because there is no pre-GST ITC/turnover baseline to show an increase in ITC benefit that must be passed on. Obiter - Observations on the absence of evidence from the complainant and on procedural opportunities afforded are ancillary to the ratio. Conclusion: No additional ITC benefit, as contemplated by Section 171(1), was shown to have accrued that required passing on; therefore, no obligation to reduce prices arose under Section 171(1) in the facts of the case. Issue 2 - Applicability of Section 171(1) when project events are entirely post-GST Legal framework: Section 171(1) is triggered by either reduction in tax rate or increase in ITC benefit; determination requires comparative assessment between pre- and post-GST periods where relevant. Precedent Treatment: The Commission did not cite or rely on any contrary or supporting judicial precedent; the finding is based on statutory scope and factual chronology. Interpretation and reasoning: The Commission analyzed chronology: RERA registration dated in post-GST period, development permission and certificate of commencement dated post-GST, first booking and first tax invoice dated post-GST, and absence of any booking, sale, demand or receipt in pre-GST period. Given this complete post-GST chronology, there was no pre-GST tax rate or ITC position against which to compare post-GST position. The Commission concluded that the statutory mechanism for identifying an increase in ITC benefit (and thereby triggering Section 171(1)) presupposes a pre-GST baseline; absent that baseline, the statutory requirement cannot be satisfied. The complainant's failure to produce any contrary evidence was noted but the primary reason for non-attraction of Section 171(1) was the absence of a pre-GST comparator. Ratio vs. Obiter: Ratio - Section 171(1) does not apply where the identical supply stream (project) had no pre-GST transactions - i.e., where the supplier's relevant activities and supplies commenced only after GST implementation, making comparative assessment impossible. Obiter - Remarks concerning procedural default by the complainant (non-appearance and non-filing) are not essential to the legal conclusion. Conclusion: The provisions of Section 171(1) are not attracted where the project and all related transactions commenced post-GST such that no pre-GST turnover or ITC position exists for comparison; consequently, no profiteering or failure to pass on ITC was established and proceedings were rightly closed. Ancillary procedural and evidentiary findings (supporting conclusions above) Legal framework: Principles of natural justice and procedural fairness require opportunity to be provided to complainant and respondent to be heard. Interpretation and reasoning: The Commission afforded multiple opportunities for submission and personal hearing to the complainant; no submissions or attendance occurred. The respondent furnished documentary evidence showing post-GST commencement. The Commission relied on these documents to determine the timelines relevant for Section 171(1) analysis. Ratio vs. Obiter: The procedural history is supportive but not determinative of the statutory interpretation; non-participation by the complainant is obiter to the extent the decision rests on absence of pre-GST transactions. Conclusion: Procedural opportunities were given; absence of complainant's evidence reinforced the factual finding that the project began post-GST and supports the conclusion that Section 171(1) is not attracted.