Real estate developer cleared of profiteering charges as post-GST project lacked pre-GST price comparison under Section 171

CCI dismissed profiteering allegations against a real estate developer regarding failure to pass on input tax credit benefits to flat purchasers. The Commission found that since the project commenced post-GST implementation (commencement certificate dated 23.08.2018), there was no pre-GST price history for comparison to establish profiteering. Without pre-GST turnover or ITC data, no additional benefit accrued to the developer that required passing on to buyers. Section 171 of CGST Act 2017 was not applicable as the project began after GST implementation on 01.07.2017. Proceedings were dropped.

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Issues involved:
The issues involved in the judgment are whether the benefit of input tax credit (ITC) was passed on to the buyer by way of a commensurate reduction in the price of a flat purchased in a specific project, and whether the provisions of Section 171 of the Central Goods and Services Tax (CGST) Act, 2017 regarding passing on the benefit of ITC were applicable in the case.

Issue 1: Allegation of non-passing of ITC benefit:
The applicant alleged that the respondent did not pass on the benefit of ITC to him by reducing the price of the flat purchased in the "Galaxy" project. The Director-General of Anti-Profiteering (DGAP) conducted a detailed investigation under Rule 129 of the CGST Rules, 2017 based on this allegation.

The DGAP issued a notice to the respondent under Rule 129 of the CGST Rules, calling for a reply regarding the non-passing of ITC benefit. Despite opportunities to respond and provide supporting documents, the respondent did not avail of them.

Issue 2: Investigation findings and respondent's submissions:
The investigation covered the period from 01.07.2017 to 28.02.2022. The respondent, a partnership firm engaged in the business of builders & developers, stated that the "Galaxy" project commenced in 2018 and followed GST council instructions. The respondent also mentioned opting for the new GST scheme from 01.04.2019.

The DGAP found that the project started in the post-GST era, with no sale in the pre-GST period. The DGAP observed that the anti-profiteering provisions did not apply to the project as it was developed after the GST implementation, and there was no pre-GST turnover or ITC for comparison.

Issue 3: Applicability of Section 171 of the CGST Act:
Section 171 of the CGST Act, 2017 requires the passing on of tax rate reduction or ITC benefits to recipients. In this case, all events like allotment, agreement, and construction occurred post-GST implementation, making the comparison of pre-GST and post-GST turnover or ITC irrelevant.

The DGAP concluded that Section 171(1) of the CGST Act, 2017 was not applicable in this case, as there was no requirement for a commensurate reduction in prices due to the absence of additional ITC benefits during the GST period compared to the pre-GST period.

Separate Judgment:
The Commission, after reviewing the DGAP's report and documents, determined that the respondent did not benefit from additional ITC during the GST period compared to the pre-GST period. Therefore, the provisions of Section 171 of the CGST Act, 2017 were not attracted to the "Galaxy" project, and the proceedings were dropped.

The Commission found that the applicant's allegations were incorrect, as there was no obligation for the respondent to pass on any additional ITC benefit. The order was to be sent to all interested parties, and the case file was to be closed upon completion.

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