Refusal to pass ITC benefit to home buyers leading to profiteering u/s 171; Rs.3.12 crore refund with interest ordered

The dominant issue is profiteering under Section 171 CGST Act: relying on the DGAP report and admission that some ITC benefit had been passed, the GSTAT found the respondent contravened Section 171 as the DGAP's quantification error did not negate the statutory obligation to pass ITC benefit. Outcome: the respondent is directed to refund Rs. 3,12,78,937 to 1,104 eligible home buyers with applicable interest under Section 133(3)(B) CGST Act, to effect repayment within three months and file a compliance report with the jurisdictional GST commissioner and the DGAP.

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Issues: Whether the respondent contravened Section 171 of the Central Goods and Services Tax Act, 2017 by not passing on the benefit of Input Tax Credit and, if so, the quantum of profiteering and the relief to be granted including interest under Section 133(3)(B) CGST Act, 2017.

Analysis: The authority's investigation computed a gross profiteered amount for the specified project and recorded that a portion of the benefit had already been passed to home buyers. The report set out the total calculated profiteering, the amount already passed on, and the residual amount required to be refunded to eligible home buyers. The statutory framework requires that the benefit of Input Tax Credit be passed on to recipients and permits the levy of interest on amounts to be refunded under Section 133(3)(B) of the CGST Act, 2017. The residual profiteered amount was identified for distribution to the eligible home buyers and interest was held to be payable on that amount.

Conclusion: The respondent contravened Section 171 of the CGST Act, 2017; the residual profiteered amount of Rs. 3,12,78,937 is to be refunded to the eligible home buyers with applicable interest under Section 133(3)(B) of the CGST Act, 2017 within three months, and a compliance report shall be submitted to the jurisdictional GST commissioner and the authority.

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