Benefit of input tax credit must be passed to recipients; proportionate profiteering to be refunded with interest.

Failure to pass on the benefit of input tax credit and reduced pre GST tax incidence permits computation and recovery of the differential amount; the investigatory recalculation of pre GST tax incidence and attributable input tax credit established total profiteering of Rs. 12,20,694, which the respondent accepted. Where work completed post GST gives a proportionate benefit, that share must be paid to the recipient and attracts interest under the CGST Rules; the authority directed payment of Rs. 9,36,700 for completed work with applicable interest and upheld the recovery directive.

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Issues: (i) Whether the respondent has profiteered by not passing on benefit of input tax credit and reduced pre-GST tax incidence to the service recipient and, if so, the amount of profiteering; (ii) Whether the respondent is liable to pass the proportionate profiteered amount for completed work to the applicant and to pay interest under the CGST Rules.

Issue (i): Whether the respondent has profiteered by not passing on the benefit of input tax credit and reduced pre-GST tax incidence and the quantification of such profiteering.

Analysis: The DGAP investigation recalculated pre-GST tax incidence and additional benefit from input tax credit for specified materials, revised pre-GST tax liability, and computed a differential benefit post-GST. The respondent accepted the DGAP computation and the applicant concurred; the DGAP's calculations identify a total profiteering amount attributable to the respondent for the period under investigation.

Conclusion: The respondent has profiteered in the amount of Rs. 12,20,694. Held in favour of Revenue.

Issue (ii): Whether the respondent must pass the proportionate profiteered amount relating to completed work to the applicant and pay interest under the Rules.

Analysis: The DGAP determined the proportion of work completed in the post-GST period and computed the proportionate profiteering for completed work. The respondent and applicant accepted these computations. Rule 133(3)(b) of the Central Goods and Services Tax Rules, 2017 prescribes payment of interest as applicable to the recipient for delayed passing of benefit.

Conclusion: The respondent is liable to pay Rs. 9,36,700 (proportionate profiteering for completed work) to the applicant along with applicable interest. Held in favour of Revenue.

Final Conclusion: The appellate authority upholds the DGAP findings that the respondent failed to pass on GST-related benefits, directs payment of the quantified proportionate profiteered amount for completed work with applicable interest, and disposes of the matter accordingly.

Ratio Decidendi: Under Section 171 of the Central Goods and Services Tax Act, 2017, benefits arising from reduced tax incidence and additional input tax credit must be passed on to the recipient; failure to do so permits computation and recovery of the differential (proportionate) amount along with interest under the Central Goods and Services Tax Rules, 2017.

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