Project-Level Input Tax Credit Allocation Requires Actual GST Benefits to Be Passed to Real-Estate Buyers With Interest
Real-estate anti-profiteering calculations should measure incremental GST input tax credit actually availed at project level, determine total savings against project expenditure, and allocate a uniform benefit per square foot across the project area rather than compare credit with turnover or buyer collections. Unavailed pre-GST CENVAT credit on input services cannot notionally reduce post-GST benefits because it did not reduce the earlier tax incidence. GST collected on enhanced consideration forms part of the recoverable profiteered amount, and statutory interest applies. The resulting project-specific benefit must be passed to affected recipients.
Issues: (i) Whether the project-level anti-profiteering methodology, using purchase value to quantify additional input tax credit and allocating savings per square foot, complied with the remand directions; (ii) Whether unavailed pre-GST CENVAT credit on input services could be notionally set off against post-GST input tax credit; and (iii) Whether GST on the additional realisation and interest were validly included in the recoverable amount.
Issue (i): Whether the project-level anti-profiteering methodology, using purchase value to quantify additional input tax credit and allocating savings per square foot, complied with the remand directions.
Analysis: The governing methodology for real-estate projects rejects a comparison of input tax credit with turnover because construction expenditure, credit accrual and buyer collections do not have a direct correlation throughout a project. It requires the total GST-related saving for the project to be determined and allocated over the total project area to derive a uniform per square foot benefit. The revised computation quantified the additional input tax credit against project purchase value, determined the project-level saving, divided it by total area, and applied the resulting per square foot figure to the sold area. Purchase value was used to measure credit against project expenditure, not as a substitute for turnover or for allocating benefit according to buyer collections. Judicial review under Articles 226 and 227 does not permit replacement of a fair and reasonable factual computation accepted by the specialised Tribunal absent jurisdictional error, manifest illegality or non-compliance with the binding remand directions.
Conclusion: The methodology was consistent with the remand directions and was validly sustained, against the assessee.
Issue (ii): Whether unavailed pre-GST CENVAT credit on input services could be notionally set off against post-GST input tax credit.
Analysis: Section 171 of the Central Goods and Services Tax Act, 2017 concerns the benefit of input tax credit actually accruing to the supplier and its passing on to recipients. The pre-GST returns recorded nil CENVAT credit actually availed, while substantial GST input tax credit was availed after GST. A credit that was only legally available but remained unclaimed cannot be treated as having reduced the pre-GST tax incidence, since that would compare actual post-GST benefit with a hypothetical pre-GST benefit. The benefit was not restricted to credit on goods, as the post-GST credit on input services was also actually availed.
Conclusion: Unavailed pre-GST CENVAT credit could not be notionally set off against the post-GST input tax credit; the determination based on actual availment was upheld, against the assessee.
Issue (iii): Whether GST on the additional realisation and interest were validly included in the recoverable amount.
Analysis: GST collected on the enhanced consideration resulting from non-passing of the tax benefit forms part of the profiteered amount because it represents tax collected on the additional realisation. The direction to pay interest at 18% was part of the statutory anti-profiteering consequence, and no independent jurisdictional infirmity was established.
Conclusion: Addition of GST at 12% to the profiteered amount and the direction for interest at 18% were valid, against the assessee.
Final Conclusion: The project-specific calculation founded on actually availed incremental input tax credit, allocated on a per square foot basis and inclusive of GST collected on the excess realisation, remains enforceable with interest payable to the affected recipients.
Ratio Decidendi: In real-estate anti-profiteering proceedings, incremental input tax credit actually availed after GST must be determined as project-level savings and allocated by area; unavailed pre-GST credit cannot be imputed as a notional offset.