Input tax credit pass-through: failure to remit quantified ITC benefit requires refund to recipients with interest and statutory penalty.

Failure to pass on the benefit of input tax credit for specified projects was found to create an enforceable liability: the quantified profiteered amount must be refunded to identifiable recipients with applicable interest calculated under the relevant rules, and a statutory penalty applies for non-deposit within the prescribed time. The analysis relied on a tax authority investigation report that quantified additional benefit from increased input tax credit, accepted by the respondent, and applied the rule for interest on amounts due; the penalty provision prescribes a percentage levy where conditions for waiver are not met.

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Issues: Whether the Respondent has profiteered by failing to pass on benefit of input tax credit to recipients for the period 01.07.2017 to 31.03.2024, and if so, whether the Respondent is liable to refund the profiteered amount with applicable interest and liable to penalty under Section 171(3A) of the Central Goods and Services Tax Act, 2017.

Analysis: The Tribunal considered the DGAP investigation report prepared under Section 171 of the Central Goods and Services Tax Act, 2017 read with Rule 129 of the Central Goods and Services Tax Rules, 2017 which computed additional benefit from increased input tax credit for three projects (Pebbles, Hynish Tower-10 and Greens) and quantified aggregate profiteering. The Respondent accepted the DGAP-calculated amounts in its communication. The Tribunal noted the identifiability of recipients on the record and applied Rule 133(3)(b) of the Central Goods and Services Tax Rules, 2017 for interest liability. The Tribunal also noted that Section 171(3A) of the CGST Act, 2017 (effective from 01.01.2020) prescribes penalty equivalent to ten percent of the amount profiteered unless the amount is deposited within thirty days of the order.

Conclusion: The Tribunal held that the Respondent has profiteered to the extent quantified by the DGAP report (aggregate profiteered amount Rs. 98,72,474/- including GST) and is liable to pay the profiteered amount to the eligible homebuyers along with applicable interest; penalty is leviable under Section 171(3A) of the Central Goods and Services Tax Act, 2017 in accordance with its terms.

Ratio Decidendi: Failure to pass on the benefit of input tax credit as mandated under Section 171 of the Central Goods and Services Tax Act, 2017 results in an enforceable liability to refund the quantified profiteered amount to identifiable recipients with applicable interest under Rule 133(3)(b) of the Central Goods and Services Tax Rules, 2017 and attracts penalty under Section 171(3A) of the Central Goods and Services Tax Act, 2017.

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