2026-VIL-43-GSTAT-DEL-NAPA
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  2. 2026-VIL-43-GSTAT-DEL-NAPA

SGST Tribunal

GST - Anti-Profiteering - Obligation to pass on benefit of additional Input Tax Credit to homebuyers under Section 171(1) of CGST Act - Complaint alleging that construction service supplier did not pass on benefit of ITC to homebuyers by reducing prices on introduction of GST - DGAP investigation found that supplier became eligible to avail ITC after GST implementation whereas it had no CENVAT or VAT credit eligibility in pre-GST period - Whether benefit of additional ITC was required to be passed on to homebuyers - HELD - Where a supplier becomes entitled to benefit of ITC on account of implementation of GST on inputs and input services, such benefit is required to be passed on to recipients by way of commensurate reduction in prices. Section 171 casts statutory obligation upon every registered supplier to ensure that benefit arising from availability of additional ITC is not retained by supplier but is passed on to recipients. Respondent not disputing entitlement to additional ITC or computation by DGAP. Accordingly, supplier became entitled to benefit of additional ITC upon implementation of GST and such benefit was required to be passed on to eligible homebuyers in accordance with Section 171(1) of CGST Act, 2017 – Ordered accordingly - Scope of Section 171(1) of CGST Act - Meaning of "commensurate reduction in prices" - Supplier contended that it passed on ITC benefit by carrying out structural upgrades and additional fittings in flats free of cost and that value of such works exceeded profiteered amount - Whether additional structural works and free fittings constitute passing on benefit of ITC in manner contemplated under Section 171(1) of CGST Act - HELD - Section 171(1) requires benefit of ITC to be passed on by way of commensurate reduction in prices. Supplier cannot substitute such reduction in prices by extending benefit in any other form such as increase in quantity, supply of free material or any collateral benefit. The legislative mandate is that reduction of tax rate or benefit of ITC must not only be reflected in reduction of prices but must also reach recipient. Statutory requirement cannot be tampered with by supplier by substituting benefit in form of reduction of actual price with any other form such as additional or free material – The additional structural works and fittings carried out by supplier, even if actually executed and even if value thereof exceeds profiteered amount, cannot be treated as passing on benefit in manner contemplated under Section 171(1) – The supplier is not at liberty to substitute prescribed mode by providing additional works or other benefits. Accordingly, additional structural works and fittings do not amount to passing on benefit of ITC by way of commensurate reduction in prices - Calculation of profiteered amount - Inclusion of GST component in amount to be refunded to homebuyers - Supplier required to pass on profiteered amount with corresponding GST component along with interest - Consideration collected by supplier from homebuyers was inclusive of GST - Whether profiteered amount should be refunded without GST component or inclusive of GST - HELD - Consideration collected by supplier from homebuyers was inclusive of GST. Profiteered amount being part of consideration realised from homebuyers is liable to be returned along with corresponding GST component. Both Central and State Government had no intent of collecting additional GST on higher price as they had sacrificed their revenue in favour of buyer - By compelling buyers to pay additional GST on higher price, supplier has not only defeated intent of Governments but has also acted against interest of consumer. GST collected by supplier on additional realization has rightly been included in profiteered amount. Respondent is liable to pass on profiteered amount together with GST component to eligible homebuyers - Interest payable on profiteered amount - Supplier liable to pay interest at prescribed rate from date of collection of higher amount - Rule 133(3)(b) of CGST Rules provides that registered person shall return amount not passed on together with interest at prescribed rate from date of collection of higher amount till date of its return - Whether interest is payable on profiteered amount and at what rate - HELD - Where benefit of reduction in tax or ITC has not been passed on by way of commensurate reduction in prices, registered person shall return amount not passed on together with interest. Section 171 is broad enough to empower Central Government to prescribe interest to ensure that suppliers are deterred from pocketing benefits meant for consumers - Respondent is liable to pay interest at rate of eighteen per cent per annum on profiteered amount from date of collection till date of its actual payment in terms of Rule 133(3)(b) of CGST Rules, 2017 - Penalty under Section 171(3A) of CGST Act - Penalty provision came into force on 01.01.2020 but profiteering activity occurred in period prior to enforcement - Investigation period extends from 01.07.2017 to 02.01.2020. Construction of project completed and occupancy certificate applied for prior to coming into force of penalty provision on 01.01.2020 - Whether penalty under Section 171(3A) is attracted - HELD - Section 171(3A) was inserted by Finance (No. 2) Act, 2019 and came into force on 01.01.2020. Although proceedings culminated just one day after insertion of penalty provision, conduct constituting alleged contravention had already concluded prior to coming into force of said provision. In peculiar facts and circumstances where project had been completed and Respondent had already applied for Occupancy Certificate before 01.01.2020, imposition of penalty under Section 171(3A) would not be warranted. Accordingly, no penalty under Section 171(3A) of CGST Act, 2017 is leviable in facts of present case.
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