Project-wise anti-profiteering analysis in real estate upheld, with ITC benefit and unsold-unit treatment assessed on fair methodology.

Real estate anti-profiteering under section 171 of the CGST Act was assessed on a project-wise basis using a fair methodology that compared pre-GST and post-GST credit ratios to purchase value, because construction projects do not show a direct turnover-ITC correlation. The material on record, including ledger entries, credit notes and recipient confirmations, was accepted as showing that input tax credit benefit had been passed on to the complainant and other homebuyers. Separate verification of the EPC contractor's ITC flow was found unnecessary for this purpose. ITC reversal for unsold units and the later report's revised approach were also accepted, and the no-profiteering conclusion stood.

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Issues: (i) Whether the methodology adopted for examining profiteering in a real estate project, by comparing the ratio of credit to purchase value and computing project-wise savings per square foot, was valid; (ii) whether the benefit of input tax credit had been passed on to the complainant and other homebuyers; (iii) whether the EPC contractor's input tax credit flow required separate verification for determining profiteering by the respondent; and (iv) whether the treatment of ITC reversal, unsold units, and the difference between the earlier and later reports affected the conclusion under section 171.

Issue (i): Whether the methodology adopted for examining profiteering in a real estate project, by comparing the ratio of credit to purchase value and computing project-wise savings per square foot, was valid.

Analysis: Section 171 of the Central Goods and Services Tax Act, 2017 requires any benefit of input tax credit to be passed on by commensurate reduction in prices. The methodology in real estate matters is not confined to a rigid formula, and the relevant exercise must reflect the peculiar facts of the project. The comparison of pre-GST and post-GST credit ratios to purchase value, as applied after the guidance in Reckitt Benckiser, was accepted as a fair method for the project under investigation because there is no direct correlation between turnover and ITC in a construction project.

Conclusion: The methodology was upheld and the objection to it failed.

Issue (ii): Whether the benefit of input tax credit had been passed on to the complainant and other homebuyers.

Analysis: The record included ledger entries and confirmation of adjustment of a quantified amount against the complainant's dues. The respondent also placed material showing that ITC benefit had been passed on to other homebuyers through credit notes, and confirmations were obtained from some recipients. The complainant did not displace this material with reliable evidence.

Conclusion: The objection that no ITC benefit was passed on was rejected.

Issue (iii): Whether the EPC contractor's input tax credit flow required separate verification for determining profiteering by the respondent.

Analysis: The EPC contractor supplied work contract services to the respondent and did not sell units to homebuyers. The investigation examined the contractor-related documents, but the liability under section 171 depended on the respondent's own supply position and whether any benefit accrued to it for onward passing. The contractor had no active role in the accrual of benefit to homebuyers for this purpose.

Conclusion: The objection regarding failure to examine the contractor's ITC flow was rejected.

Issue (iv): Whether the treatment of ITC reversal, unsold units, and the difference between the earlier and later reports affected the conclusion under section 171.

Analysis: Units sold after completion were excluded from the scope of taxable supply, and ITC relating to unsold units at the time of occupancy certificate had to be reversed. The net ITC position for the entire project was therefore relevant. The later report used the methodology approved after the earlier approach was found flawed, so the divergence from the earlier report did not undermine the final conclusion. The criticism that the data were selective or unverified was also rejected because the report showed independent checking against GSTR-9 and chartered accountant certifications.

Conclusion: The objections based on ITC reversal, unsold units, and alleged inconsistency in reports were rejected.

Final Conclusion: The report concluding that no contravention of section 171 was made out was accepted, and the anti-profiteering objections were rejected in full.

Ratio Decidendi: In real estate anti-profiteering matters, the existence of profiteering must be assessed on a project-wise basis by a fair and reasonable methodology that reflects the absence of a direct turnover-ITC correlation, and ITC relating to amounts not retained or to supplies outside the scope of tax cannot be treated as benefit available for passing on.

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