No ITC Benefit Passed On; GSTAT Orders Refund to homebuyers

The proceedings arose from a complaint filed by homebuyers alleging that M/s Ahmedabad East Infrastructure LLP failed to pass on the benefit of Input Tax Credit (ITC) after the implementation of GST in its project “Arvind Uplands I”. The Standing Committee on Anti-profiteering referred the matter to the Directorate General of Anti-Profiteering (DGAP) for a detailed investigation.

DGAP examined the time span from 01.07.2017 to 31.05.2025 and observed that there was additional availing of ITC by the respondent during the GST period. Though the ratio of ITC was 8.64% prior to the implementation of GST, the same jumped to 9.95% after the introduction of GST, thus giving rise to an increase of 1.31%. Such an increase was calculated to be Rs. 1,07,78,857 plus GST Rs. 1,293,463, which amounts to Rs. 12,072.

Main Issue: Whether the respondent profits by not passing additional ITC benefits to homebuyers under Section 171, warranting a refund with interest and penalty?

Tribunal’s Decision: The Tribunal has upheld the view of the DGAP, stating that there had been an additional gain of ITC after GST, which was not passed onto the home buyers and thus the offender is liable for an offence committed according to Section 171 of the CGST Act. The Respondent has been ordered by the Appellate Tribunal to repay the full profit amount of Rs. 12,072,320, along with an interest of 18% per year from the date of collecting the profit amount till its refund.

Interest of 18% per year, according to Section 133(3)(b), is mandatory in nature and falls under the statutory mandate of passing the benefit upon making the supply. Regarding the penalty, it was observed that Section 171(3A) applies to the case since the period of violation was after 01.01.2020. However, the penalty will not be imposed on the Respondent if the profit amount is deposited in the government account within 30 days from the date of the order.

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