2026 (1) TMI 892 - AT - GST

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 ... Profiteering - respondent has already passed the benefit of the ITC to its home buyers - contravention of provisions as contained under Section 171 of Central Goods Services Tax, 2017 - HELD THAT:- In view of the fact that the DGAP has admitted that the respondent has already passed the benefit of the ITC to its home buyers to the tune of Rs. 91,45,350. It is also to be taken into consideration that in the Para 26 of the report. It is mentioned that total amount of Rs 3,12,78,937 is required to be passed on to 1,104 eligible home buyers. The amount mentioned in the concluding part of the report of the DGAP prima facie appears to be erroneous - Now the respondent is required to pay an amount of Rs. 3,12,78,937 along with applicable interest to the eligible home buyers. The respondent is directed to pay the amount of interest to the eligible home buyers, as applicable, on the aforesaid amount in terms of the provision under Section 133(3)(B) of the CGST Act, 2017 - it is directed that the entire amount be refunded within three months to the eligible home buyers. The respondent is further directed to submit compliance report to the jurisdictional GST commissioner and DGAP. The matter is disposed of. 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.