Input Tax Credit pass through failure: shortfall refund with interest directed to affected buyers under anti profiteering rules.

Respondent failed to pass the full additional input tax credit benefit arising on GST implementation; re calculation of pre and post GST input tax credit ratios showed an incremental benefit, and the shortfall attributable to 13 buyers totals the balance profiteered amount of Rs. 5,80,280. The investigative computation and the respondent's admission were accepted, and the respondent is directed to refund the balance to eligible buyers with applicable interest and subject to penalty for non compliance under the anti profiteering framework, with compliance reporting to tax authorities within prescribed timelines.

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Issues: (i) Whether the respondent (supplier of construction services) profiteered by failing to pass on the additional benefit of input tax credit arising on introduction of GST for the period 01.07.2017 to 29.01.2020, and if so, the quantum of profiteering and relief to be granted.

Analysis: The Tribunal examined DGAP's re-investigation report which computed pre GST and post GST ratios of available input tax credit to purchase value, finding an increase from 5.08% to 12.28% (an additional 7.20%). Applying that increase to post GST purchase value and attributing savings per square foot to units sold in the pre GST period, DGAP calculated a total profiteered amount of Rs. 4,65,07,296 plus GST @12% (total Rs. 5,20,88,172). DGAP further verified that the respondent had already passed ITC benefits aggregating Rs. 6,63,41,543 to 253 pre GST buyers, resulting in an excess benefit for 240 buyers and a shortfall of Rs. 5,80,280 in respect of 13 buyers. The Tribunal also considered the respondent's written acceptance of the DGAP report and its undertaking to pay the outstanding amount with applicable interest. The Tribunal applied Section 171 of the Central Goods and Services Tax Act, 2017 (anti profiteering) and Rule 133(3)(b) of the Central Goods and Services Tax Rules, 2017 regarding payment of interest, and noted applicability of penalty under Section 171(3A) for the relevant period.

Conclusion: The Tribunal held that the respondent profiteered by failing to pass on the full additional ITC benefit; the balance profiteered amount of Rs. 5,80,280 is liable to be refunded to 13 eligible buyers along with applicable interest. The DGAP investigation report is accepted and the respondent is directed to pay the balance amount with interest within 30 days and submit compliance to the jurisdictional CGST/SGST Commissioner with intimation to DGAP within two months.

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