Builder Can Deposit Unrefunded ITC Benefit In Consumer Welfare Fund After Genuine Efforts: GSTAT Delhi

The Goods and Services Tax Appellate Tribunal (GSTAT), New Delhi, on 4 November held that a builder may deposit the profiteered amount in the Consumer Welfare Fund where it is unable to refund eligible homebuyers directly despite making genuine efforts to contact them and return the money.

A Bench of Technical Member A. Venu Prasad partly allowed an application filed by Bengal Shapoorji Housing Development Private Limited, seeking modification of an earlier order directing it to refund the benefit of Input Tax Credit (ITC) to homebuyers. It observed:

“In view of the foregoing discussion, the Tribunal considers it appropriate to permit the Applicant to deposit in the Consumer Welfare Fund only such amounts as are attributable to eligible homebuyers in respect of whom direct refunds cannot be effectuated, subject to compliance with the requirements of Rule 133(3)(c) of the CGST Rules, 2017.”

The dispute arose from a complaint alleging that the builder had failed to pass on the benefit of additional ITC received after the introduction of GST. Section 171 of the Central Goods and Services Tax (CGST) Act, 2017, requires businesses to pass on such tax benefits to customers by way of commensurate price reductions.

Following an investigation, the Director General of Anti-Profiteering (DGAP) found that the builder had not passed on the benefit to homebuyers. The Tribunal subsequently directed the builder to refund approximately Rs. 1.49 crore, including the GST component, along with interest at 18% per annum.

The builder approached the Tribunal seeking modification of the order. It submitted that although it was willing to make the refunds, it could not obtain the bank account details of several homebuyers. It therefore sought permission to deposit the unrefunded amounts in the Consumer Welfare Fund.

It also sought exclusion of the GST component from the profiteered amount, arguing that it had already paid the tax to the Government and that requiring it to pay the same amount again would result in double recovery.

The Tribunal noted that Rule 133(3)(c) of the CGST Rules permits the deposit of amounts in the Consumer Welfare Fund where the eligible person does not claim the refund or cannot be identified.

However, it clarified that the mere absence of bank account details does not establish that a homebuyer cannot be identified or has not claimed the refund.

Further, the Bench held that the builder must demonstrate genuine efforts to contact the homebuyers, obtain their bank account details and make direct refunds. Only where direct refunds remain impossible, despite such efforts, and the statutory conditions are satisfied can the builder deposit the corresponding amounts in the Consumer Welfare Fund.

It directed the builder to maintain records specifying the amount payable to each homebuyer, the efforts made to contact them and the reasons why direct refunds could not be effected. It also directed the builder to refund the amount payable to the original complainant, V.K. Jain, directly to him, along with applicable interest.

On the GST component, the Tribunal rejected the builder's contention that it should exclude the amount because it had already deposited the tax with the Government. It held that payment of GST to the Government and passing on the benefit of additional ITC to homebuyers are separate statutory obligations. It said:

“Payment of GST to the Government does not, by itself, absolve the Applicant of its separate statutory obligation under Section 171 of the CGST Act to pass on the benefit arising from the availability of additional ITC to the recipients.”

Moreover, the Bench rejected the builder's reliance on a subsequent decision in Bengal Emami Housing Limited. It held that a subsequent order in another case cannot, by itself, justify reopening an earlier decision through a rectification application.

It directed the builder to complete compliance within 30 days. It retained the original profiteering amount and interest liability and clarified that failure to comply would attract a penalty under Section 171(3A) of the CGST Act.

Accordingly, the GSTAT partly allowed the application.

For the DGAP: Advocate Nidhi Dabas

For Bengal Shapoorji Housing Development Private Limited: Advocates P.K. Das and Mukul Agarwal