2026-VIL-37-GSTAT-DEL-NAPA
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  2. 2026-VIL-37-GSTAT-DEL-NAPA

SGST Tribunal

GST – Anti-profiteering - Methodology for determination of profiteering in real estate sector - The Respondent challenges the methodology adopted by the DGAP in determining profiteering in respect of construction services contending that no fixed formula exists for such determination and that the methodology based on comparison of ratio of input tax credit to purchase value is flawed as it does not account for project-specific factors and actual cost savings - Whether the methodology adopted by the authority for determining additional ITC benefit and computing profiteered amount is legally sustainable and correctly applied in the facts and circumstances of the case – HELD - No uniform formula can be prescribed for determination of profiteering as the facts of each case and each industry may differ. The determination has to be computed by taking into account relevant and peculiar facts of each case, with the authority having sufficient flexibility under the rules to determine appropriate methodology on a case-to-case basis so long as it is fair, reasonable and consistent with the statutory provisions - The Hon'ble Delhi High Court in Reckitt Benckiser India Pvt. Ltd. has held that in the real estate sector, the methodology should be based on determination of project-wise total savings arising on account of GST and thereafter apportioning such savings over the total saleable area to arrive at per square foot benefit to be passed on to individual homebuyers, which directly addresses the concerns - The methodology adopted by the authority departs from the earlier turnover-based approach and adopts a methodology based upon comparison of ratio of eligible credits to construction cost in pre-GST and post-GST periods, determination of total savings arising on account of GST and subsequent allocation over total saleable area, which directly addresses the concerns identified and is fair, reasonable and based upon objective material - The anti-profiteering provisions seek to ensure that benefit arising on account of additional input tax credit accrues uniformly to all eligible recipients through the methodology approved by the High Court itself based on determination of project-wise savings and allocation thereof over total area so as to ensure similarly situated homebuyers receive proportionate benefit - The methodology is upheld and the objections of the Respondent concerning methodology, jurisdiction, limitation, natural justice and scope of investigation are rejected - Derivation of additional input tax credit benefit and obligation to pass on to recipients - Whether the Respondent derived any additional benefit of input tax credit consequent upon implementation of goods and services tax and if so, whether such benefit was passed on to eligible recipients by way of commensurate reduction in prices in terms of the statutory provisions – HELD - Upon implementation of GST with effect from first July 2017, the Respondent became entitled to avail input tax credit on both goods and input services used in construction of the project unlike the pre-GST regime where availability of credit was comparatively restricted; the investigation findings show that the ratio of credit availed to purchase value was 9.41 percent during pre-GST period which increased to 11.85 percent in the post-GST period, resulting in an additional benefit of 2.44 percent. The Respondent's contention that increment in ITC merely reflects higher GST incidence on inward supplies and therefore cannot be regarded as benefit is devoid of merit as the material on record clearly establishes that the Respondent became entitled to avail and utilise a higher quantum of credit in the GST regime than what was available in the pre-GST regime - The statutory provision mandates that any benefit of ITC shall be passed on to the recipients by way of commensurate reduction in prices - The Respondent's claim of having already passed on the benefit is examined and found that although the Respondent had passed on benefit amounting to a certain sum to certain homebuyers, the same was not sufficient to discharge its statutory obligation as the benefit required to be passed on exceeded the benefit actually passed on to eligible recipients; excess benefit passed on to certain homebuyers cannot be adjusted against the shortfall in benefit payable to other homebuyers since each recipient is independently entitled to receive commensurate benefit - The computation undertaken by the authority is found to be correct, reasonable and based on records furnished by the Respondent - The Respondent had derived additional input tax credit benefit and failed to pass on the entire benefit to eligible homebuyers, thereby contravening the statutory provisions, and a balance amount remains liable to be passed on to eligible homebuyers - Levy of interest on profiteered amount - Whether interest is payable on the profiteered amount determined and if so, the period and manner of computation – HELD - The Rule 133(3)(b) of the CGST Rules, 2017 applicable during the relevant period specifically empower the authority to direct return of the amount not passed on by way of commensurate reduction in prices together with interest, and accordingly the Respondent is liable to pay interest at the rate of 18% per annum on the profiteered amount from the respective dates of collection of the excess amount from the recipients till the date on which the benefit is actually passed on or refunded - The contention of the Respondent that delay in conclusion of proceedings was attributable to authorities and therefore no interest should be levied is without merit as the liability to pay interest arises on account of retention of benefit which ought to have been passed on to recipients at the relevant time and such liability is statutory in nature and not extinguished merely because the proceedings culminated at a later date - The Respondent is held liable to pay interest at the rate of eighteen percent per annum on the profiteered amount from the respective dates of collection of excess amount from recipients till the date on which the benefit is actually passed on or refunded - Non-imposition of penalty for contravention of anti-profiteering provision - Whether penalty is imposable upon the Respondent under the provisions of the goods and services tax statute for the contravention during the relevant period – HELD - The investigation in the matter covers the period from first July 2017 to sixteenth July 2019, and the penalty provision was inserted by the Finance Act 2019 that came into force with effect from first January 2020 providing imposition of penalty in cases where a registered person is found to have profiteered any amount or the benefit of input tax credit is not passed on to recipient by way of commensurate reduction in prices. Since the entire period involved in the proceedings precedes the existence of the penalty provision, the penal provision cannot be applied retrospectively to the Respondent - While the Respondent is liable to pass on the profiteered amount together with applicable interest in terms of the statutory provisions, penalty cannot be levied upon the Respondent under the facts and circumstances of the case.
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