TaxTMI 
TaxTMI 
2026 (5) TMI 566
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.... to as "the Respondent") in its project "Vasavi GP Trends", situated at Anilath Maja Housing Society, 8-2-120/86/9/A/1, 12, 2 and 13, North End, Opp. Park Hyatt, Road No. 2, Banjara Hills, Telangana. 2. The first complainant alleged that the Respondent had failed to pass on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in price in respect of the purchase of a residential unit in the said project upon the introduction of GST w.e.f. 01.07.2017, in contravention of Section 171 of the CGST Act, 2017. 3. The complaint was examined by the Standing Committee on Anti-Profiteering, which, upon being satisfied, forwarded the matter to the Directorate General of Anti-Profiteering (hereinafter referred to as "the DGAP") on 30.05.2022 for detailed investigation under Rule 129(1) of the CGST Rules, 2017. 4. In the meantime, another application was filed by Sh. Vepachedu Bhargav, Flat No. 404, Vasavi GP Trends, Nanakramguda, Hyderabad (hereinafter referred to as the "second complainant"), which was examined by the Standing Committee on Anti-Profiteering in its meeting held on 12.01.2023 and thereafter forwarded to the DGAP for investigation. The said application ....
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.... and the methodology adopted for computation of profiteering. Accordingly, the DGAP was directed to reconsider the matter on the following issues: (i) Whether the Respondent is liable to pay the alleged profiteered amount of Rs.2,54,20,175/- along with GST @12% (total Rs.2,84,70,596/-), as against Rs.6,02,89,656/- determined in the original DGAP report? (ii) Whether the notional service tax credit computed by the DGAP at 1.7978% of the cost of construction in the post-GST period is to be adopted, or whether the actual Input Tax Credit on services is to be considered while computing the profiteered amount? (iii) Whether the benefit of Rs. 46,40,136/- claimed to have been passed on to 13 customers was rightly excluded by the DGAP on the basis of denial by such customers through email? (iv) Whether, in cases where comparable pre-GST sale prices are not available for similar units sold in the post-GST period, an inference of profiteering can be drawn? (v) Whether the Respondent had already cony factored the benefit of Input Tax Credit in the sale price fixed for the post-GST period customers, and if so, whether any profiteering can be said t....
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....itional benefit, which is required to be passed on to the recipients proportionately. 12.5. The contention of the Respondent that ITC on input services ought to be excluded from the computation was examined and rejected. The DGAP held that the reliance placed on the Reckitt Benckiser India Pvt. Ltd. v. Union of India, WP (C) 7743/2019 was misplaced, as the said judgment does not prescribe exclusion of service-related ITC. It was observed that the incremental benefit arising from GST is not confined to goods alone and includes ITC on both goods and services, and therefore no component of ITC can be excluded from the profiteering computation. 12.6. With respect to Question No. 3, the DGAP examined whether denial of receipt of ITC benefit of Rs. 46,40,136/- by 13 customers through email responses could be treated as conclusive evidence. It was observed that such responses, by themselves, cannot override documentary financial records. The determination under Section 171 must be based on objective evidence such as books of accounts, customer ledgers and credit notes. Upon examination of such records, it was found that the Respondent had adjusted the ITC benefit against....
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....ich an amount of Rs. 3,48,69,781/- was found to have already been passed on to the recipients. Accordingly, the balance profiteering amount was computed at Rs. 2,54,20,175/-. 12.13. Upon re-working, the DGAP recorded that, as per the original determination, the total profiteering amount stood at Rs. 6,02,89,656/-, out of which Rs. 3,48,69,781/- had already been passed on to the recipients, leaving a balance profiteering of Rs. 2,54,20,175/-. However, upon detailed examination of additional documents and recalculations furnished by the Respondent, the profiteering was reworked. In this regard, the DGAP, as reflected in Table-A of the Report, determined the revised profiteering amount at Rs. 1,51,87,625/-, out of which the balance profiteering to be passed on was computed at Rs. 71,37,747/-. Table- A (Revised profiteering) S.No. Name of the buyer Flat No. Of the buyer Area of the flat of the buyer in Sq. Ft Date of booking of the flat Benefit of ITC passed on to the buyer of the flat during the post GST period, if any (in Rs.) Amount profiteered (excluding GST) Additional benefit required to be passed on (excluding GST) . C V Channam....
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....1,87,625 71,37,747 On the basis of the foregoing analysis, the DGAP concluded that the Respondent gained an additional Input Tax Credit (ITC) benefit of Rs.294.84 per sq.ft. The total ITC benefit came to Rs.1,51,87,625. However, the Respondent did not fully pass on this benefit to homebuyers, as required under Section 171 of the CGST Act, which mandates that any reduction in tax rate or availability of ITC must be proportionately passed on to consumers. Upon revised computation, the DGAP determined that the builder profiteered a total of Rs.71,37,747 (excluding GST). This amount represents the excess collected from homebuyers, and it must be passed on to the eligible recipients listed in "Table A" of the report. 13. Hearings in the matter were held on 18.03.2026 and 16.04.2026. Shri J. Shankar Raman, Learned Advocate, Shri Md. Meraj Alam, Finance Manager of the Company, Shri M. Sarvanan and Shri Gurubatham, Chartered Accountants, appeared on behalf of the Respondent. Shri Ajay Kumar Tehlan, AAD, along with Shri Ravi Passi, Inspector, appeared on behalf of the DGAP. None appeared on behalf of the Complainant. 14. The Respondent accepted the DGAP's report dated 13.03.2026....
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....ntum of such refund? (iv) Whether penalty under Section 171(3A) of the CGST Act, 2017 is attracted in the facts and circumstances of the present case, and if so, the quantum of penalty? Determination of Profiteering and Passing of ITC Benefit 17. With regard to Issue Nos. (i) and (ii), this tribunal finds that upon the introduction of GST, the Respondent became entitled to avail Input Tax Credit on both goods and input services, unlike the pre-GST regime where credit was restricted. The comparison of ITC in the pre-GST and post-GST periods shows that an additional benefit accrued to the Respondent. In terms of Section 171 of the CGST Act 2017, such benefit is required to be passed on to the homebuyers by way of commensurate reduction in prices. 18. It is further held that, pursuant to the directions of the Hon'ble GSTAT, the DGAP re-examined the matter in its report dated 13.03.2026 and adopted the methodology based on comparison of ITC to construction cost in the pre-GST and post-GST periods. This methodology is in line with the judgment of the Hon'ble Delhi High Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India, WP (C) 7743/2019 and is found to be app....
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....he headline rate visible to the customer is above 6.5%. What the customer does not see is the embedded taxes on account of cascading and sticking of input taxes in the cost of the flat, etc. 5. This will change under GST. Under GST, full input credit would be available for offsetting the headline rate of 12%. As a result, the input taxes embedded in the flat will not (& should not) form a part of the cost of the flat. The input credits should take care of the headline rate of 12% and it is for this reason that refund of overflow of input tax credits to the builder has been disallowed. 6. The builders are expected to pass on the benefits of lower tax burden under the GST regime to the buyers of property by way of reduced prices/ installments. It is, therefore, advised to all builders / construction companies that in the flats under construction, they should not ask customers to pay higher tax rate on instalments to be received after imposition of GST. 7. Despite this clarity on law position, if any builder resorts to such practice, the same can be deemed to be profiteering under section 171 of GST law. 21. From the above clarification, this Tribunal fin....
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.... derived additional ITC benefit amounting to Rs.1,51,87,625/- and the same had not been fully passed on to the homebuyers. The revised computation carried out by the DGAP is found to be reasonable, evidence-based and in consonance with the provisions of Section 171 of the CGST Act, 2017. Accordingly, the balance profiteered amount of Rs.71,37,747/- (exclusive of GST) is liable to be passed on to the eligible recipients. 26. It is also relevant to note that, as per the DGAP Report dated 13.03.2026, the average sale price charged by the Respondent for the residential units ranged approximately between Rs.3,980/- to Rs.4,000/- per sq. ft. On the basis of the revised computation carried out by the DGAP, the profiteering works out to approximately Rs.138/- per sq. ft., computed on the basis of the total profiteered amount vis-à-vis the total saleable area considered for the purpose of computation. Levy of GST on the Profiteered Amount 27. With regard to levy of GST on the profiteered amount, this Tribunal finds that the balance profiteered amount of Rs.71,37,747/- determined by the DGAP is exclusive of GST, whereas the consideration collected by the Respondent from the h....
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....ion is mandatory in nature and leaves no discretion in its application. 30. With regard to the issue of interest, reference may be made to the judgment of the Hon'ble Delhi High Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India, WP (C) 7743/2019, wherein the Hon'ble Court has dealt with this issue in paragraph 153 of the judgment. The relevant extract is reproduced below: 153. This court is of the view that Section 171 of the Act, 2017 is broad enough to empower the Central Government to prescribe penalty and interest to ensure that the suppliers are deterred from pocketing the benefits meant for the consumers when taxes amounts so pocketed by the supplier/registered person would not have a sufficient deterrent effect on deviant behavior unless interest and penalty are levied to prevent such actions from taking place in the first place. The width and amplitude of Section 171 by which the authority is empowered to ensure that a reduction in tax rate or the Input Tax Credit availed results in a commensurate reduction in the price of goods or services clearly encompasses within it the power to ensure that such conduct which leads to profiteering does not take." ....