Profiteering under GST: No ITC passthrough obligation for projects entirely post-GST, resulting in no contravention and closure of proceedings

Profiteering under GST examined the input tax credit passthrough obligation where a project commenced entirely post-GST; the legal basis was that comparative ITC benefit arises only when tax rate reduction or ITC increase occurs across pre- and post-GST periods, therefore no ITC benefit required to be passed on for wholly post-GST supplies. Reliance was placed on precedent in the Delhi HC affirming that where both construction and supply occur in the post-GST regime, Section 171 passthrough does not apply, resulting in closure of proceedings and no contravention found.

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Issues: Whether the Respondent contravened Section 171 of the CGST Act, 2017 by failing to pass on the benefit of Input Tax Credit in respect of construction services in the project that commenced wholly in the post-GST period.

Analysis: Section 171 is engaged where there is a reduction in tax rate or an increase in ITC that gives rise to a comparative benefit to be passed on, frequently in projects spanning pre-GST and post-GST periods. The project under consideration commenced entirely after implementation of GST and the Respondent validly exercised the option under Notification No. 03/2019-Central Tax to adopt earlier GST rates. The DGAP's investigation concluded that no additional ITC benefit accrued to the Respondent because there is no pre-GST period comparator for the project. The DGAP report was examined and accepted on these factual and legal bases.

Conclusion: It is held that Section 171 of the CGST Act, 2017 has not been contravened and the complaint of profiteering is rejected; decision is in favour of the Assessee.

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