GSTAT Rejects Profiteering Claim; Section 171 Inapplicable to Fully Post-GST Projects

The proceedings arose from a complaint filed by homebuyers alleging that Sobha Limited failed to pass on Input Tax Credit (ITC) benefits in respect of a residential project “International City” at Gurugram, in violation of Section 171 of the CGST Act. The Standing Committee referred the matter to the Director General of Anti-Profiteering (DGAP), who conducted an investigation.

The DGAP, in its report dated 21.08.2025, found that the ratio of credit to turnover declined from 12.26% in the pre-GST period to 11.02% in the post-GST period, indicating no additional benefit accrued to the developer. Accordingly, it concluded that there was no profiteering. Before the GSTAT, the Respondent raised preliminary objections, contending that the entire transaction—including booking (2019), agreement, construction, and payments—occurred post-GST, and the pricing had already factored in ITC benefits. The complainants argued that the property was under construction and that ITC benefit should still be passed on.

Issue Before Court: Whether anti-profiteering provisions under Section 171 of the CGST Act apply where the entire real estate project and transaction are executed in the post-GST regime.

HC Decided: The GST Appellate Tribunal upheld the DGAP report and rejected the profiteering allegation. It held that where the entire chain of events booking, agreement, construction, and payments takes place after the introduction of GST, there is no pre-GST benchmark to compare ITC benefits. In such cases, pricing is presumed to have already factored in the availability of ITC. Relying on the Delhi High Court ruling in Reckitt Benckiser, the Tribunal clarified that even in construction-linked plans, if the project is entirely post-GST, Section 171 does not get triggered.

The fact that construction was ongoing at the time of booking does not alter this position. Further, the Tribunal noted that the DGAP’s computation showed a reduction in ITC ratio post-GST, reinforcing that no additional benefit arose to be passed on. Therefore, the preliminary objections were accepted, the complaint was rejected, and the DGAP report was affirmed.

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