Builder Liable for Profiteering Due to Failure to Pass ITC Benefit Under GST

DG Anti Profiteering Vs Bengal Shapoorji Housing Development Pvt. Ltd. (GSTAT)

The present proceedings arise from a complaint filed under Rule 128 of the Central Goods and Services Tax Rules, 2017 alleging profiteering in a real estate project, on the ground that the benefit of Input Tax Credit (ITC) was not passed on to the buyer after the introduction of GST from 01.07.2017.

The complaint was examined by the Standing Committee on Anti-Profiteering and referred to the Directorate General of Anti-Profiteering (DGAP) for investigation. The DGAP conducted an investigation for the period from 01.04.2017 to 30.09.2024 and submitted its report. It found that, in the pre-GST regime, ITC was limited and taxes such as Central Excise duty, VAT, and Entry Tax formed part of the cost passed on to buyers. In the post-GST regime, broader ITC became available on inputs and input services, resulting in additional benefit to the developer.

The DGAP determined that the ratio of ITC to purchase value increased from 8.25% in the pre-GST period to 14.00% in the post-GST period, yielding an additional benefit of 5.75%. This benefit was required to be passed on to buyers by way of commensurate reduction in prices under Section 171 of the CGST Act, 2017. However, it was found that such benefit was not passed on. Based on the additional ITC, the DGAP computed a profiteered amount of Rs.1,33,32,208/-, which increased to Rs.1,49,32,073/- after adding GST at 12%, to be distributed among 1525 homebuyers.