Anti-profiteering in real estate requires passing on additional ITC to each buyer; retrospective penalty was refused.

In real estate anti-profiteering matters, the Tribunal held that project-specific comparison of pre-GST and post-GST credit to purchase value, with allocation over total saleable area, was a legally sustainable method and rejected objections based on jurisdiction, limitation, natural justice, scope and procedure. It found that the ITC-to-purchase-value ratio increased after GST, creating additional ITC benefit that had to be passed on to each eligible homebuyer by commensurate price reduction; excess benefit to some buyers could not offset shortfall to others. Interest was upheld on the profiteered amount, but penalty was not leviable because the penal provision was inserted later and could not apply retrospectively.

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Issues: (i) Whether the methodology adopted for determining profiteering in the real estate project was legally sustainable; (ii) whether the respondent derived additional input tax credit benefit after GST implementation and failed to pass it on to eligible homebuyers; (iii) whether interest and penalty were leviable.

Issue (i): Whether the methodology adopted for determining profiteering in the real estate project was legally sustainable.

Analysis: The methodology based on comparison of credit to purchase value in the pre-GST and post-GST periods, followed by project-wise allocation over total saleable area, was found consistent with the principles governing anti-profiteering in real estate matters. The absence of a fixed statutory formula did not invalidate the exercise, and objections based on jurisdiction, limitation, natural justice, scope of investigation, and alleged procedural defects were rejected.

Conclusion: The methodology and the DGAP report were held legally sustainable.

Issue (ii): Whether the respondent derived additional input tax credit benefit after GST implementation and failed to pass it on to eligible homebuyers.

Analysis: The respondent's ITC-to-purchase-value ratio increased from 9.41% in the pre-GST period to 11.85% in the post-GST period, resulting in additional benefit of 2.44%. The Tribunal held that the benefit of additional ITC under Section 171(1) of the Central Goods and Services Tax Act, 2017 had to be passed on to each eligible recipient by commensurate reduction in prices, and excess passing on to some buyers could not be set off against shortfall to others.

Conclusion: The respondent was found to have derived additional ITC benefit and to have failed to pass on the entire benefit to all eligible homebuyers.

Issue (iii): Whether interest and penalty were leviable.

Analysis: Interest was held payable under Rule 133(3)(b) of the Central Goods and Services Tax Rules, 2017 at 18% per annum on the profiteered amount from the date of collection till the date of return. Penalty was declined because Section 171(3A) of the Central Goods and Services Tax Act, 2017 was inserted later and could not be applied retrospectively to the period in question.

Conclusion: Interest was upheld and penalty was not leviable.

Final Conclusion: The respondent was directed to pass on the balance profiteered amount with interest, while the proposed penalty was rejected.

Ratio Decidendi: In real estate anti-profiteering matters, additional input tax credit benefit must be determined on a fair, project-specific basis and passed on to each eligible recipient by commensurate reduction in price; recipient-specific shortfall cannot be neutralised by excess benefit given to others, and penalty cannot be imposed retrospectively absent an operative penal provision for the relevant period.

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