GST input tax credit benefit must be passed on to homebuyers, with refund, interest and penalty exposure for non-compliance.

Where introduction of GST increased the input tax credit benefit, the anti-profiteering framework required the supplier to pass that advantage on to homebuyers by commensurate price reduction. The investigation found that the input tax credit ratio rose from 9.70% to 11.89%, creating an additional benefit that was not fully and uniformly transferred to recipients. The unpassed amount was quantified and ordered to be refunded with 18% interest from the date of collection until refund, while the post-01.01.2020 period also attracted penalty exposure for profiteering if compliance was not made within the prescribed time.

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Issues: (i) Whether the respondent derived additional input tax credit benefit on introduction of GST and failed to pass it on to homebuyers by commensurate reduction in prices; (ii) whether the respondent was liable to return the profiteered amount with interest and penalty.

Issue (i): Whether the respondent derived additional input tax credit benefit on introduction of GST and failed to pass it on to homebuyers by commensurate reduction in prices.

Analysis: The investigation compared the ratio of input tax credit to purchase value in the pre-GST and post-GST periods and found an increase from 9.70% to 11.89%, yielding an additional ITC benefit of 2.18%. The respondent was required under Section 171 of the Central Goods and Services Tax Act, 2017 to pass on that benefit through commensurate reduction in prices. The record showed that the benefit was not passed on fully and uniformly, and a balance amount remained unpaid to the concerned homebuyers.

Conclusion: The respondent had derived additional ITC benefit and had not fully passed it on; the issue is decided against the respondent.

Issue (ii): Whether the respondent was liable to return the profiteered amount with interest and penalty.

Analysis: The unpassed benefit was quantified at Rs. 4,01,676/- and, with GST at 12%, at Rs. 4,49,877/-. Rule 133(3)(b) of the Central Goods and Services Tax Rules, 2017 authorises return of the amount not passed on along with interest at 18% per annum from the date of collection until refund. The order also held that Section 171(3A) of the Central Goods and Services Tax Act, 2017 attracted penalty for profiteering for the relevant post-01.01.2020 period, subject to compliance within the prescribed time.

Conclusion: The respondent is liable to refund the balance profiteered amount with interest and is exposed to penalty under Section 171(3A) for the period covered by that provision.

Final Conclusion: The anti-profiteering complaint was upheld to the extent of the quantified balance amount, and directions were issued for refund, interest, and consequential penalty exposure in case of non-compliance.

Ratio Decidendi: Where GST results in additional input tax credit, the corresponding benefit must be passed on to recipients by commensurate reduction in prices, and any amount not passed on may be ordered to be refunded with interest and penalty as authorised by the anti-profiteering framework.

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