GSTAT Orders Refund of Rs. 11.91 Lakh Profiteering with 18% Interest to Homebuyers

The case arose from complaints filed by homebuyers alleging that the developer had charged GST at higher rates without passing on the benefit of input tax credit (ITC) in its “Golf Estate” project. The matter was referred for investigation, and the DGAP examined financial records covering both pre-GST and post-GST periods.

Upon re-investigation (following directions from the Delhi High Court), it was found that the ratio of ITC to purchase value increased from 3.11% in the pre-GST period to 3.34% in the post-GST period. This indicated a marginal but clear benefit of 0.23% arising to the developer. However, this benefit was not passed on to eligible homebuyers in respect of 364 units sold before issuance of the completion certificate. The developer, during proceedings before the Tribunal, accepted the DGAP findings and expressed willingness to refund the profiteered amount but contested the levy of interest.

Main Issue: Whether the developer failed to pass on additional ITC benefits to homebuyers in violation of Section 171 of the CGST Act, and whether interest and penalty are applicable.

Tribunal’s Decision: The Tribunal held that the developer had indeed derived additional ITC benefit post-GST and was legally bound to pass on the same to buyers through commensurate price reduction. Since this was not done, the conduct amounted to profiteering under Section 171. Rejecting the developer’s arguments, the Tribunal clarified that the obligation to pass on ITC benefit arises at the time of supply itself and not upon completion of the project. Consequently, any retention of such benefit is treated as excess collection from buyers.

Accordingly, the Tribunal directed the developer to refund Rs. 11,91,763 (including GST) to the eligible homebuyers along with interest at 18% per annum, calculated from the date of collection of excess amount till the date of actual refund. On penalty, the Tribunal observed that Section 171(3A) is applicable to the relevant period. However, it noted that no penalty would be leviable if the amount is deposited within 30 days of the order.

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