Developer cleared of anti-profiteering charges after passing ITC benefits exceeding Section 171 requirements to home buyers

CCI dismissed anti-profiteering proceedings under Section 171 of CGST Act, 2017 against a developer. The complainant alleged non-passing of ITC benefits on flat purchase post-GST implementation. Investigation revealed the developer had already passed ITC benefit of Rs 8,608 to complainant, exceeding required 0.24% of taxable turnover. Developer passed Rs 17,26,772 to 56 home buyers against required Rs 1,03,143. Complainant withdrew pursuit of matter. CCI held no violation occurred as ITC benefits were already passed on, making proceedings non-maintainable.

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Issues Involved:
1. Whether there was a reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after the implementation of GST.
2. Whether the Respondent passed on such benefit to the recipients in terms of Section 171 of the CGST Act, 2017.

Summary of Judgment:

Issue 1: Reduction in Rate of Tax or Benefit of ITC Post-GST Implementation

The investigation by the Director General of Anti Profiteering (DGAP) was initiated based on an application alleging that the Respondent did not pass on the benefit of Input Tax Credit (ITC) after the implementation of GST. The DGAP examined the phase-wise project registration details and limited its investigation to Tower-1 of the project "VTP Beaumonde." It was observed that the Respondent availed ITC of GST paid on all inputs and input services post-GST, whereas pre-GST, only Service Tax credit on input services was availed. The comparative ratios of ITC to turnover for pre-GST and post-GST periods were 2.14% and 2.38%, respectively, indicating an additional ITC benefit of 0.24% post-GST.

Issue 2: Passing on the Benefit to Recipients

The DGAP verified that the Respondent had a clear stipulation in post-GST contracts that ITC had already been factored into the transaction value. The Respondent also claimed to have passed on benefits of 4.5% to pre-GST home buyers and 7% to post-GST home buyers. The DGAP confirmed that the Respondent had passed on Rs. 17,26,772/- to 56 home buyers who booked flats in the pre-GST period, which was more than the required Rs. 1,03,143/-. Emails were sent to 56 home buyers to verify the claims, and 23 confirmed receipt of the benefit, including the Applicant No. 1, who acknowledged an ITC benefit of Rs. 8,608/-.

The DGAP concluded that the Respondent had not contravened Section 171 of the CGST Act, 2017, as the benefit of ITC had been adequately passed on. The National Anti-Profiteering Authority (NAA) issued a notice to the Applicant No. 1, who did not pursue the matter further, confirming that he had received the ITC benefit.

Final Decision:

The Commission decided that the case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017, as the benefit of ITC had been passed on to the Applicant No. 1 and other home buyers. Accordingly, the proceedings were not maintainable and were dropped.

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