DGAP Vs Transcon Sheth Creators Pvt. Ltd (GSTAT)
The proceedings arose from an investigation initiated under Section 171 of the Central Goods and Services Tax Act, 2017, following complaints alleging that the benefit of input tax credit (ITC) was not passed on through commensurate reduction in prices in a residential real estate project. The Standing Committee on Anti-Profiteering found a prima facie case and referred the matter for investigation. An initial investigation report concluded that the anti-profiteering provisions had been contravened.
Subsequently, in light of the judgment of the Delhi High Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India & Ors. dated 29.01.2024, which critically examined the methodology for determining profiteering in real estate cases, the matter was remanded for fresh investigation. The High Court held that no fixed or uniform formula could be applied to determine profiteering, rejected the ITC-to-turnover ratio as flawed for real estate projects, and mandated an area-based computation that ensures equal per-square-foot benefit to buyers. It also outlined four scenarios governing entitlement to ITC benefits depending on the timing of construction and purchase vis-à-vis the introduction of GST.
Pursuant to the remand, the Director General of Anti-Profiteering conducted a fresh investigation and issued notice to the respondent, seeking information and allowing inspection of records. The respondent furnished project-wise financial data and supporting documents over several communications. Based on the examination of records, it was found that the residential project comprised 340 flats with a total saleable area of 3,69,171 square feet. The Occupancy Certificate was issued on 20.12.2021, and all units were sold prior to that date. Accordingly, all units were treated as eligible for investigation. The investigation period was determined as 01.07.2017 to 20.12.2021. The respondent had opted for the 12% GST rate with ITC from 01.04.2019, and computations were made accordingly.
