Profiteering in construction services resolved as DGAP report accepted and ITC benefit transfer for flat buyers finalised and closed

The note addresses alleged profiteering in construction services concerning whether the benefit of input tax credit was passed to flat purchasers; the investigation by the designated authority reached a consensual resolution between the parties, the investigative report was accepted and the enquiry is concluded. The operative effect is that the authoritys findings on input tax credit passthrough stand endorsed and no further proceedings continue, resulting in closure of the matter and finalisation of compliance regarding transfer of tax benefit to buyers.

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Issues: Whether the DGAP report finding profiteering by the Respondent and the question of passing on of ITC benefit to flat buyers (under Rule 128 of the Central Goods and Services Tax Rules, 2017) should be accepted and the matter closed.

Analysis: The Tribunal considered the DGAP investigation report which quantified profiteering and concluded there was an entitlement to GST/ITC related benefit. The Applicant (flat buyers association) informed the Tribunal that the dispute regarding passing on of ITC benefit had been settled with the Respondent through a Memorandum of Understanding dated 05.10.2019 and provided documentary evidence (MOU) showing appropriate benefits/price reductions were allowed to the allottees. The Tribunal examined the DGAP report and the settlement documents and found that the issue of passing of ITC benefit had been resolved between the parties.

Conclusion: The DGAP report is accepted and, in view of the settlement reflected in the MOU, the matter is closed; decision is against the Respondent and in favour of the Revenue.

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