GSTAT Holds Builder Liable for Profiteering with 18% Interest

The proceedings arose from an investigation conducted by the Director General of Anti-Profiteering (DGAP) against the respondent, a real estate developer, in relation to a housing project. The complaint alleged that the developer had failed to pass on the benefit of additional input tax credit (ITC) available under the GST regime to homebuyers, as required under Section 171 of the CGST Act. Upon examining financial records for the pre-GST and post-GST periods, the DGAP found that the ratio of ITC to purchase value had increased from 7.67% to 12.08%, resulting in additional benefit.

While a substantial portion of this benefit had already been passed on, an amount of Rs. 6,53,861 (inclusive of GST) remained unreturned to buyers. During the proceedings, the respondent accepted the DGAP findings without dispute and submitted proof of having refunded the amount to customers. The respondent also sought waiver of penalty and interest, arguing absence of a charging provision and computational uncertainty.

Issue Raised: Whether the respondent was liable to refund the profiteered amount along with interest and whether penalty under Section 171(3A) was applicable.

HC’s Ruling: The Tribunal upheld the DGAP’s findings and confirmed that the respondent had profiteered by not fully passing on the ITC benefit to homebuyers. It directed the respondent to refund the remaining amount of Rs. 6,53,861 along with interest at 18% per annum from the date of collection till the date of refund.

On the issue of penalty, the Tribunal noted that Section 171(3A) came into force after the relevant period of violation and further observed that the respondent had already refunded the amount. Accordingly, no penalty was imposed. The Tribunal clarified that interest is compensatory in nature and must be paid to ensure that buyers are restituted for the time value of money retained by the supplier.