Input tax credit profiteering requires credible proof of non-passing of benefit and a direct nexus to excess retention.

A profiteering finding under Section 171 of the Central Goods and Services Tax Act, 2017 requires credible material showing that the supplier retained the benefit of input tax credit without passing it on through a commensurate price reduction. The Tribunal found the record insufficient, as the DGAP's working showed mixed invoice-level pricing movements and no reliable nexus between the alleged credit benefit and unlawful retention of profit. Recipient verification also indicated that most recipients had received the benefit. On that basis, the alleged profiteering was not established and the quantified demand could not be sustained.

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Issues: Whether the respondent had profiteered by not passing on the benefit of input tax credit to recipients by way of commensurate reduction in price after GST implementation.

Analysis: The proceeding under Section 171 of the Central Goods and Services Tax Act, 2017 required material showing that the respondent had actually retained the benefit of additional input tax credit and had not passed it on through reduction in base price. The Tribunal noted that the DGAP's own working showed mixed pricing behaviour across the invoices, including increases and reductions, but no material established a direct nexus between any alleged benefit of input tax credit and an unlawful retention of profit. The Tribunal also took note of the verification from recipients, most of whom confirmed receipt of the benefit, and found that the record did not contain reliable evidence to sustain a quantified profiteering demand.

Conclusion: The issue was answered in the negative. The respondent was not found to have profiteered by not passing on the benefit of input tax credit.

Ratio Decidendi: A profiteering finding under Section 171 of the Central Goods and Services Tax Act, 2017 cannot be sustained without credible material showing non-passing of the input tax credit benefit by commensurate price reduction and an actual nexus between the alleged credit benefit and excess retention by the supplier.

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