DGAP Vs IREO Pvt. Ltd. (GSTAT)
The Goods and Services Tax Appellate Tribunal (GSTAT) recently adjudicated the matter of DGAP vs. IREO Pvt. Ltd., arising from an investigation initiated by the National Anti-Profiteering Authority (NAA) under Section 171 of the Central Goods and Services Tax Act, 2017 (“CGST Act”). The Directorate General of Anti-Profiteering (DGAP) had alleged that the real estate developer failed to pass on the benefit of Input Tax Credit (ITC) to buyers post-GST implementation. The case involved three projects—“Skyon,” “Ireo City Central,” and “Managed Service Apartment.”
However, upon review and in light of the Delhi High Court’s judgment in Reckitt Benckiser India Pvt. Ltd. v. Union of India (W.P. (C) No. 7743/2019, decided on 29 January 2024), the Tribunal found no evidence of profiteering, concluding that Section 171 of the CGST Act was not attracted.
Background and Investigation
Following NAA’s direction under Order No. 14/2019 dated 21 October 2019, DGAP initiated an investigation into all projects executed by IREO Pvt. Ltd. for potential anti-profiteering violations. DGAP’s initial report, submitted on 15 December 2021, examined three major projects.
In January 2024, the Delhi High Court’s decision in Reckitt Benckiser India Pvt. Ltd. significantly altered the legal framework for anti-profiteering analysis in real estate cases. The Court observed that no fixed formula could apply to all projects and that profiteering must be assessed based on the specific facts of each case. Importantly, it held that comparing ITC-to-turnover ratios between pre- and post-GST periods was flawed since construction progress and tax credit accruals varied across project lifecycles.
