TaxTMI 
TaxTMI 
2026 (7) TMI 517
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.... the GST regime, a developer providing construction services is entitled to avail Input Tax Credit (for short "ITC") on eligible inputs and input services used in the project. The introduction of GST brought about significant changes in the availability of ITC as compared to the erstwhile indirect tax regime. The legislative intent underlying Section 171 of the CGST Act, 2017 is to ensure that any benefit arising from a reduction in the rate of tax or from the availability of additional ITC is passed on to the recipients of the supply. In the context of construction services, this provision seeks to ensure that homebuyers receive the benefit of such tax reductions/ rationalization through a commensurate reduction in the price payable by them. Accordingly, the issue for determination in the present proceedings is whether the benefit of additional ITC accrued to the Respondent on introduction of GST has been passed on to the recipients by way of commensurate reduction in prices or not? 3. The present proceedings arise from a complaint filed by Mr. Raman Kumar Kalia, 08191, ATS Advantage Phase I, Ahinsa Khand-Indirapuram, Ghaziabad-201014 (hereinafter referred to as "the Complainan....
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....requisite information and documents. 11. Meanwhile, the Principal Bench Goods and Services Appellate Tribunal (for short "the GSTAT"), constituted under sub-section (3) of section 109 of CGST Act, has been empowered to examine Anti-Profiteering cases w.e.f. 01.10.2024, vide Notification No. 18/2024-Central Tax dated 30.09.2024. 12. The DGAP concluded the investigation and submitted its report dated 03.12.2024 to the Principal Bench, GSTAT. The observations and conclusion are summarised as follows: i. The investigation was carried out for the period from 01.07.2017 to 16.07.2019, i.e., from the date of implementation of GST till the date of receipt of Occupancy Certificate (for short "the OC") for the project "Gurgaon Greens". The DGAP noted that the Respondent had obtained the OC on 16.07.2019. ii. The project comprises of 642 residential units. Out of these, 435 units were sold to pre-GST customers and 142 units were sold to post-GST customers prior to receipt of OC. Since 65 homebuyers booked their units after receipt of OC, therefore, only 577 homebuyers were considered for the purpose of profiteering calculation. iii. The DGAP observed that the ....
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.... B 9.41% / 11.85% Increase in input tax credit availed Post-GST (%) C 2.44% Purchase Value of Goods and Services (Excluding Taxes and Duties) during Post-GST Period D 2,09,79,11,924/- Total savings on account of additional ITC benefit E= D*C/100 5,11,62,436.37/- Total saleable area (in Sq. Ft.) as per the list of buyers F 11,91,366/- Total saving per Sq. Ft. G= E/F 42.94 Total Sold Area (in Sq. Ft) H 7,27,150 Base Profiteered Amount I= G*H 3,12,26,983 vi. Based on the above computation, the DGAP arrived at the conclusion that the Respondent was required to pass on the benefit of Rs. 3,12,26,983/- to the eligible homebuyers. After adding GST @ 12%, amounting to Rs. 37,47,238/-, the total profiteered amount was computed as Rs. 3,49,74,221/-. vii. The DGAP also examined the claim of the Respondent that they have already passed on the benefit of ITC to the homebuyers through credit notes and other adjustments. Upon verification of the documents furnished by the Respondent, the DGAP observed that out of 577 units the respondent has passed excess benefit of ITC to 204 home-buyers to the tune of Rs. 2,15,....
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....ed over-allocation of benefit to customers who had substantially completed their payments prior to implementation of GST. Reliance was placed on the decision in DGAP v. Gopal Teknocon (P.) Ltd. [2025] 180 taxmann.com 250 (GSTAT-New Delhi). ii. The Respondent challenged the methodology adopted by the DGAP and submitted that the same was contrary to Section 171 of the CGST Act, 2017 and the principles laid down by the Hon'ble Delhi High Court in Reckitt Benckiser India Pvt. Ltd. (supra). It was contended that the DGAP had erroneously treated the increase in the ratio of ITC to purchase value in the post-GST period as the benefit required to be passed on without examining whether there was any actual reduction in the cost of supply. According to the Respondent, the increase in ITC availability was largely attributable to higher GST rates applicable on inward supplies and input services under the GST regime and, therefore, a higher quantum of ITC did not necessarily translate into a corresponding benefit under Section 171 of the CGST Act, 2017. It was further argued that the methodology ignored factors such as increased tax incidence on procurements, project-specific cost stru....
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....(3)(c) of the CGST Rules, 2017. It was argued that in long-term real estate projects several allottees may have transferred their units or ceased to be traceable and, therefore, direct restitution to all recipients may not be feasible. vii. The Respondent challenged the very initiation of the proceedings and submitted that the requirements prescribed under Rules 128 and 129 of the CGST Rules, 2017 had not been complied with. It was contended that the Standing Committee was required to examine whether the material placed before it disclosed a prima facie case of non-passing of benefit under Section 171 of the CGST Act, 2017 before referring the matter for detailed investigation. According to the Respondent, neither the application nor the accompanying material disclosed any such prima facie evidence and, therefore, the reference made to the DGAP was without jurisdiction and liable to be set aside. viii. The Respondent further contended that the proceedings, as well as the impugned DGAP Report dated 03.12.2024, were barred by limitation. It was submitted that the timelines prescribed under Rules 129 and 133 of the CGST Rules, 2017 were mandatory in nature and that t....
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.... attributable to the authorities and no interest liability could be fastened upon the Respondent for such period. It was further submitted that, during the relevant period, there existed no statutory provision authorising imposition of penalty for violation of Section 171 and, therefore, no penalty proceedings could be sustained against the Respondent. 15. Per contra, the DGAP submitted its clarification and contended as following: i. In response to the Respondent's contention that the benefit of ITC had already been passed on to the homebuyers, the DGAP submitted that its investigation had determined a total profiteered amount of Rs. 3,49,74,221/- (including GST), out of which benefit amounting to Rs. 3,21,54,840/- had already been passed on. According to the DGAP, a balance amount of Rs. 67,32,464/- still remained to be passed on to 232 eligible homebuyers. The DGAP further submitted that any excess benefit passed on to certain homebuyers could not be adjusted against the shortfall in benefit payable to other recipients, as each homebuyer was independently entitled to commensurate benefit under Section 171 of the CGST Act, 2017. ii. With regard to the challen....
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....cation and found prima facie evidence of non-passing of benefit before referring the matter for detailed investigation. It was contended that the investigation had thereafter been conducted in accordance with Rule 129 and, therefore, the proceedings were validly initiated. vi. In reply to the objections regarding limitation, the DGAP submitted that the fresh investigation had been undertaken pursuant to the directions issued following the judgment of the Hon'ble Delhi High Court in Reckitt Benckiser India Pvt. Ltd. (supra) and that the impugned Report dated 03.12.2024 had been furnished within the period prescribed under Rule 129(6) of the CGST Rules, 2017 reckoned from the date of such directions. Accordingly, it was contended that neither the investigation nor the Report was barred by limitation. vii. With regard to the allegation of violation of Principles of Natural Justice, the DGAP submitted that the Respondent had been afforded adequate opportunity to participate in the investigation. It was pointed out that the Respondent had furnished detailed replies and documents during the course of investigation and had also been given access to the non-confidential r....
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....legally sustainable and correctly applied to the facts and circumstances of the present case? (ii) Whether the Respondent had derived any additional benefit of ITC consequent upon the implementation of GST with effect from 01.07.2017 in respect of the project "Gurgaon Greens"? (iii) If the answer to Issue No. (i) is in the affirmative, whether the Respondent passed on such benefit to the eligible recipients by way of commensurate reduction in prices in terms of Section 171(1) of the CGST Act, 2017? (iv) Whether, consequent upon the contravention of Section 171(1) of the CGST Act, 2017, the Respondent is liable for payment of interest and levy of penalty under the applicable provisions of the CGST Act, 2017? Analysis and observations Issue under point (i): 18. The Respondent has assailed the DGAP Report dated 03.12.2024 on multiple grounds. It has been contended that the methodology adopted by the DGAP is contrary to Section 171 of the CGST Act, 2017 and the principles laid down by the Hon'ble Delhi High Court in Reckitt Benckiser India Pvt. Ltd. (supra). The Respondent has argued that the increase in the ratio of ITC to purchase value does not au....
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....i Ramjibhai v. State of Gujarat (1985) 2 SCC 5/[1985] (22) E.L.T. 640, the Supreme Court has held, "...Merely because procedural rules have not been framed does not imply a negation of the power. In the absence of such rules, it is sufficient that the power is exercised fairly and reasonably, having regard to the context in which the power has been granted". In Chairman & MD, BPL Ltd. v. S.P. Gururaja, (2003) 8 SCC 567, the Supreme Court has held, "....Under the Act or the Regulations framed thereunder, no procedure for holding such consultations had been laid down. In that situation it was open to the competent authorities to evolve their own procedure. Such a procedure of taking a decision upon deliberations does not fall foul of Article 14 of the Constitution of India." 126. Consequently, Rule 126 of the Rules, 2017 to the extent it grants flexibility to NAA to determine the methodology and procedure to decide whether reduction in rate of tax or benefit of Input Tax Credit has been passed on or not to the recipient is reasonable and legal. Moreover, as per Rule 126 NAA 'may determine' the methodology and not 'prescribe' it. The substantive provision i.e. Section 171 of ....
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.... started in the pre-Goods and Services Tax period and its construction was continued in the post-Goods and Services Tax period and it was purchased by the consumer by paying the full amount of price upfront in the pre-Goods and Services Tax period, the buyer is entitled to claim benefit of Input Tax Credit on the taxes paid on the construction material purchased by the builder in the post-Goods and Services Tax period during which he has been given benefit of Input Tax Credit on the taxes on which Input Tax Credit was not available in the pre-Goods and Services Tax and cost of such taxes has been built in the price of the flat by the builder. (d) If the flat is constructed in the post-Goods and Services Tax period and it is purchased after construction being complete by making upfront payment of the full price, no benefit of Input Tax Credit would be available as the price of the flat would have been fixed after taking into account the Input Tax Credit which has become available to the builder in the post-Goods and Services Tax period and which was not available to him in the pre-Goods and Services Tax. 129. However, this Court finds that the methodology adopted b....
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....termination of the total savings arising on account of GST and subsequent allocation of such savings over the total saleable area of the project. The revised methodology therefore directly addresses the concerns identified by the Hon'ble High Court and is in consonance with the principles laid down therein. 23. We are unable to accept the Respondent's contention that the benefit should be linked solely to actual receipts during the GST period. The anti-profiteering provisions seek to ensure that the benefit arising on account of additional ITC accrues uniformly to all eligible recipients. The methodology approved by the Hon'ble High Court itself proceeds on the basis of determination of project-wise savings and allocation thereof over the total area of the project so as to ensure that similarly situated homebuyers receive proportionate benefit. 24. We do not find any merit in the submission that the absence of a statutorily prescribed formula renders the proceedings unsustainable. Paragraphs 124 to 126 of the judgment in Reckitt Benckiser (supra) clearly recognise that no uniform formula can be prescribed for all industries and that Rule 126 confers sufficient flexibility upo....
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....supply. The statutory enquiry is therefore directed towards examining whether such benefit has been passed on in respect of the relevant supply and is not confined solely to the individual complainant. Consequently, once an investigation is validly initiated, the DGAP is empowered to examine the position of all similarly situated recipients in the project. The investigation therefore, cannot be said to have exceeded its lawful scope. 29. The Respondent has also contended that the proceedings and the impugned Report are barred by limitation. We find no merit in the said objection. The re-investigation was undertaken pursuant to the directions issued following the judgment of the Hon'ble Delhi High Court in Reckitt Benckiser India Pvt. Ltd. (supra) and culminated in submission of the Report dated 03.12.2024. The issue relating to timelines prescribed under the anti-profiteering framework has been specifically considered by the Hon'ble Delhi High Court in the aforesaid judgment, wherein it has been held that the timelines prescribed under the Rules are directory in nature and lapse thereof does not automatically render the proceedings invalid. Accordingly, the proceedings cannot be....
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....gy, jurisdiction, limitation, natural justice and scope of investigation are accordingly rejected. Issue No. (i) is answered in favour of the Revenue and against the Respondent. Determination of Profiteering and passing on of the ITC benefit 32. Insofar as the issue Nos. (ii) and (iii) are concerned, this Tribunal finds that upon the implementation of GST with effect from 01.07.2017, the Respondent became entitled to avail ITC on both goods and input services used in the construction of the project "Gurgaon Greens", unlike the pre-GST regime where the availability of credit was comparatively restricted. The DGAP, in its Report dated 03.12.2024, examined the extent of credit available to the Respondent during the pre-GST and post-GST periods and concluded that an additional benefit of ITC had accrued to the Respondent consequent upon the implementation of GST. In terms of Section 171(1) of the CGST Act, 2017, such benefit was required to be passed on to the homebuyers by way of commensurate reduction in prices. 33. The DGAP has reported that during the pre-GST period, i.e., from April, 2012 to June, 2017, the Respondent availed CENVAT credit and VAT credit aggregating to Rs....
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.... being asked to make entire payment before 1st July 2017 or to face higher tax incidence for payment made after 1st July 2017. This is against the GST law. The issue is clarified as below:- 1. Construction of flats, complex, buildings will have a lower incidence of GST as compared to a plethora of central and state indirect taxes suffered by them under the existing regime. 2. Central Excise duty is payable on most construction material @12.5%. It is higher in case of cement. In addition, VAT is also payable on construction material @12.5% to 14.5% in most of the States. In addition, construction material also presently suffer Entry Tax levied by the States. Input Tax Credit of the above taxes is not currently allowed for payment of Service Tax. Credit of these taxes is also not available for payment of VAT on construction of flats etc. under composition scheme. Thus, there is cascading of input taxes on constructed flats, etc. 3. As a result, incidence of Central Excise duty, VAT, Entry Tax, etc. on construction material is also currently borne by the builders, which they pass on to the customers as part of the price charged from them. This is not visible....
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....redit was available for discharge of the Respondent's output tax liability and therefore constituted a benefit within the meaning of Section 171 of the CGST Act, 2017. 39. We do not find any merit in the contention that the benefit should be confined only to material inputs or that credit relatable to input services ought to be excluded from consideration. The benefit under GST includes ITC on both goods and input services and cannot be restricted only to material inputs. Accordingly, no exclusion of service-related ITC is warranted. 40. As regards the Respondent's contention that it had already passed on the benefit to the homebuyers, we note that the DGAP has duly examined all the documentary evidence furnished by the Respondent such as the books of accounts, customer ledgers, credit notes and other. The DGAP has given due credit wherever the passing on of benefit was substantiated by documentary evidence. However, it has been revealed from the investigation that the benefit required to be passed on under Section 171 exceeded the benefit actually passed on to the eligible recipients. We concur with the finding of the DGAP that excess benefit passed on to certain homebuyers ....
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....ntation of GST in respect of the project "Gurgaon Greens". The Tribunal further finds that although the Respondent had passed on benefit amounting to Rs. 3,21,54,840/- to certain homebuyers, the same was not sufficient to discharge its statutory obligation under Section 171(1) of the CGST Act, 2017. The computation undertaken by the DGAP is found to be correct, reasonable and based on the records furnished by the Respondent. Accordingly, the balance profiteered amount of Rs. 67,32,464/- (inclusive of GST) remains liable to be passed on to the 232 eligible homebuyers who have not received the commensurate benefit in full, in terms of Section 171 of the CGST Act, 2017. Determination of Interest 45. The next issue for determination is whether interest is payable on the profiteered amount determined in the present proceedings and, if so, the period and manner in which such interest is liable to be computed. The Respondent has contended that no interest is leviable on the grounds that substantial benefit had already been passed on to the homebuyers, that the delay in conclusion of the proceedings was attributable to the authorities, and that the statutory provisions do not contemp....
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....ve concluded on the basis of foregoing discussion that the Respondent failed to pass on the entire benefit of additional ITC accrued on account of implementation of GST to the eligible recipients by way of commensurate reduction in prices and thereby contravened the provisions of Section 171(1) of the CGST Act, 2017. Consequently, the profiteered amount determined herein is liable to be returned to the eligible recipients together with interest in terms of Rule 133(3)(b) of the CGST Rules, 2017. 49. The contention of the Respondent that delay in conclusion of the proceedings was attributable to the authorities and, therefore, no interest should be levied, is also without merit. The liability to pay interest under Rule 133(3)(b) arises on account of retention of the benefit which ought to have been passed on to the recipients at the relevant time. Such liability is statutory in nature and is not extinguished merely because the proceedings culminated at a later date. 50. Interest in anti-profiteering proceedings is compensatory in nature and is intended to restore to the recipients the time value of money representing the benefit withheld from them. Accordingly, this Tribunal h....