Profiteering in construction services: input tax credit benefit was passed on and investigation closed with no further action.

Profiteering alleged in construction services related to failure to pass on input tax credit was quantified but subsequently remedied by the supplier who voluntarily passed an amount exceeding the computed commensurate benefit; as a result the investigation report was accepted and the complaint proceedings were closed with a finding that the supplier satisfied the statutory mandate under Section 171 of the Central Goods and Services Tax Act and no further remedial action was warranted.

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Issues: Whether, in respect of the specified real estate project and investigation period, the supplier contravened Section 171 of the Central Goods and Services Tax Act, 2017 by failing to pass on the benefit of input tax credit to buyers.

Analysis: Applicable legal framework comprised Section 171 of the CGST Act, 2017 and Rule 129 of the CGST Rules, with the methodology mandated by the court in paragraph 129 of the cited High Court judgment endorsing an area-based, project-wise computation and rejecting the ITC-to-turnover ratio method. The investigating authority adopted a project-level computation using certified pre-GST and post-GST credit and purchase values to derive an incremental ITC benefit (4.92 percentage points), computed total project savings, converted the savings into a uniform per-square-foot benefit, and applied that to the complainant's booked area to arrive at a profiteering amount of Rs. 1,37,672 (base Rs. 1,22,921 plus GST Rs. 14,751). The supplier furnished verified documentary evidence including GST returns, transitional credit records, certified ledgers, architect certificates, occupancy certificate, sale agreement area, and bank evidence of payment. The supplier acknowledged the computation and produced documentary proof of transferring Rs. 1,40,732 to the buyer, an amount exceeding the computed profiteering, which was authenticated by the investigating authority. The investigation confined scope to units within the occupancy cutoff and excluded units sold after issuance of the occupancy certificate or otherwise falling outside Section 171 by operation of Schedule III and Sections 172-173 regarding reversal on exempt supplies.

Conclusion: The investigation establishes that while a computable profiteering amount arose, the supplier has voluntarily and fully discharged the obligation under Section 171 by passing on an amount exceeding the computed benefit; accordingly no contravention of Section 171 is established and no further remedial action is required.

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