Increased ITC must be passed to buyers even if it remains unutilised due to inverted duty structure: GSTAT

An anti-profiteering investigation into Bengal Shapoorji Housing Development Pvt. Ltd. has underscored the legal mandate to pass GST benefits to homebuyers. The case, involving the “Shukhobrishti – Spriha” project in Kolkata, centres on whether the developer failed to reduce property prices despite benefiting from increased Input Tax Credits (ITCs) following the 2017 tax reforms. The Directorate General of Anti-Profiteering (DGAP) conducted an extensive audit covering 2017 to late 2024. Their analysis revealed that the developer’s ITC-to-turnover ratio surged from 8.25% in the pre-GST era to 14% post-GST.

This 5.75% differential represents a significant tax saving that, under anti-profiteering laws, must be passed on to residents as a price reduction. In its defence, Bengal Shapoorji argued that an “inverted duty structure” where taxes on raw materials exceed taxes on the final product meant their unutilised credits did not constitute a “benefit”. However, the findings reinforce a strict regulatory stance: any reduction in tax burden must directly benefit the consumer. This case serves as a critical reminder that GST-related savings belong to the homebuyer, not the developer’s bottom line.

Central Issue: Whether increased ITC under GST must be passed to buyers even if it remains unutilised due to an inverted duty structure?

Tribunal’s Ruling: The GST Appellate Tribunal (GSTAT) has upheld the findings against Bengal Shapoorji Housing Development Pvt. Ltd., rejecting the developer’s attempts to bypass anti-profiteering mandates. The Tribunal clarified that Section 171 of the CGST Act focuses on the availability of tax credits; therefore, an “inverted duty structure” does not exempt a developer from passing on accrued benefits to buyers.

The ruling carries heavy financial consequences, ordering a total payback of Rs. 14,932,073 (including GST) to be distributed among 1,525 homebuyers. Additionally, the developer faces an 18% annual interest penalty from the date of overcharging and a 10% profiteering penalty. This decisive judgement reinforces that GST savings must translate into lower costs for consumers, marking a significant victory for transparency and accountability in the real estate sector.

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