GSTAT Drops Anti-Profiteering Proceedings; Finds No Benefit of ITC or Tax Rate Reduction Under Section 171 of CGST Act

The Central Goods and Services Tax Act, 2017 Section 171 was utilized for a detailed investigation to see if any Input Tax Credit (ITC) or tax cut had been retained and not passed on to the receivers, which set in motion the proceedings. The case was already remanded for re-investigation when a designated authority took it up again and researched together the project, statutory returns and financial data for the period from July 2017 to March 2024. The investigation took into account the ratio of Input Tax Credit to the total purchase value on a project basis for both pre-GST and post-GST periods.
The comparative data pointed to a definite decrease in the post-GST ratio compared to the pre-GST period, thus confirming that no extra benefit had been obtained due to GST. The conclusion was that there was neither a gain nor a tax reduction that could be passed on to customers. The study considered all heads of credit, such as transitional claims, reversals, etc., that were applicable during the computation period. After the verification was completed, the investigating authority determined that Section 171 of the CGST Act did not apply as the data presented no case of unauthorized benefit or profiteering.

Main Issue: Did the project-wise computation of Input Tax Credit indicate any benefit of rate reduction or credit accrual after the implementation of GST, thus attracting the provisions of Section 171 of the CGST Act, 2017?

Tribunal Held: The Tribunal reviewed the report that the investigation authority had submitted along with the supporting documents, credit statements, and the borrowed methodology. The Tribunal remarked the ratios for both pre-GST and post-GST periods had been worked out by the standards which the judiciary had approved and that the figures truly represented the situation. The Tribunal took notice of the data, which showed the ratio of ITC to the total purchase value continually declining, thus proving that the application of the anti-profiteering provisions was not supported by any financial incentive.

The Tribunal determined that the authority’s manner of dealing with the case involved every possible aspect and that it was in line with the directives given in similar cases. The Tribunal ruled that no additional Input Tax Credit under Section 171 of the CGST Act was available to be passed on to the consumers or to be met with the tax rate reduction. Therefore, the situation was already settled and the issue was treated as a closure report. The Tribunal also directed that the order be sent to the relevant authorities for their knowledge and for any actions that might be necessary.

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