Profiteering in sale of residential units due to increased input tax credit; refund and interest directed to all eligible buyers.

Profiteering was found where an increase in benefit from input tax credit was not passed to purchasers, resulting in a quantified shortfall of Rs. 1,00,67,677 which the respondent acknowledged; consequence: the respondent agreed to refund the profiteered amount pro rata to 340 eligible home buyers and to pay applicable interest. The DGAP investigation report was accepted and the complaint proceedings were closed on the respondent's undertaking to effect buyer-wise refunds in accordance with the DGAP calculations.

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Issues: (i) 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 to homebuyers and, if so, the quantification of the profiteered amount and appropriate relief.

Analysis: Applicable statutory regime comprises Section 171 of the Central Goods and Services Tax Act, 2017 and Rules 129 and 133 of the Central Goods and Services Tax Rules, 2017. The Delhi High Court's principles in Reckitt Benckiser (W.P.(C) No. 7743/2019) rejecting the ITC-to-turnover ratio and mandating an area-based, project-wise computation for real estate matters govern the methodology. DGAP conducted a re-investigation for the project period 01.07.2017 to 20.12.2021, verified Chartered Accountant-certified project-level figures showing an increase in ITC ratio from 12.40% (pre-GST) to 12.83% (post-GST), a differential of 0.43 percentage points, and computed total project-level savings of Rs. 89,88,997. Dividing the project savings by total saleable area (3,69,171 sq. ft.) produced a uniform per-square-foot benefit of Rs. 24.35, yielding a base profiteering amount of Rs. 89,88,997 and GST at 12% of Rs. 10,78,680, totaling Rs. 1,00,67,677. The Respondent expressly accepted the DGAP report and the computed figures, and undertook to pass the benefit to all eligible buyers in proportion to unit area. Rule 133(3)(b) provides for payment of interest on the profiteered amount.

Conclusion: Profiteering under Section 171 is established to the extent of Rs. 1,00,67,677; the Respondent is directed to refund Rs. 1,00,67,677 with applicable interest to the 340 eligible homebuyers in proportion to their unit areas within thirty days and to file compliance evidence.

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