GSTAT Delhi Directs Candeur Constructions To Pass On ₹1.63 Crore ITC Benefit To 188 Homebuyers

The Principal Bench of the Goods and Services Tax Appellate Tribunal (GSTAT), Delhi, has directed Candeur Constructions to pass on an ITC benefit of ₹1.63 crore, including GST, to 188 homebuyers of its Bengaluru project, Candeur Carlisle.

It also directed the builder to pay 18% interest from the date the higher amount was collected from each homebuyer until the benefit is passed on.

A Bench comprising Judicial Member Justice Mayank Kumar Jain and Technical Member A. Venu Prasad accepted the revised computation submitted by the Directorate General of Anti-Profiteering (DGAP).

It held that the builder was required to pass on the additional ITC benefit through a commensurate reduction in prices under Section 171 of the Central Goods and Services Tax (CGST) Act, 2017.

The proceedings arose from a complaint filed by homebuyers Pramod Kumar and Parveen Kumari, who alleged that Candeur Constructions had failed to pass on the additional ITC benefit available after GST was introduced on July 1, 2017.

Following an investigation, the DGAP concluded that the builder had not passed on the benefit to eligible buyers.

The project, developed under a joint development agreement with landowner Kamani Tubes Limited, comprised 304 units. Of these, 188 flats booked before the Occupancy Certificate dated December 9, 2020, were considered eligible for the benefit.

The DGAP initially calculated the total profiteered amount at ₹1,62,51,974, including GST. The builder challenged the calculation, arguing that the project area had been incorrectly assessed and that the pre-GST purchase and tax-credit figures could not be relied upon without establishing their connection with the project.

The builder also pointed out that the original calculation used a project area of 3,93,856 square feet, while the Occupancy Certificate recorded a total built-up area of approximately 5,36,891 square feet.

The Tribunal examined the pre-GST and post-GST figures. Before GST, the builder had availed Service Tax and VAT credits totalling ₹57,54,706 against a purchase value of ₹8,63,55,956. For the post-GST period, net GST ITC of ₹11,50,74,530 was availed against a purchase value of ₹1,37,58,11,645.

The DGAP calculated the credit-to-purchase-value ratio at 6.66% for the pre-GST period and 8.36% for the post-GST period, reflecting an increase of 1.70 percentage points.

The Tribunal upheld the methodology, observing that the DGAP had relied on the builder's statutory returns and project-related records. It held that the calculation had to be based on the facts of the particular project, as no single formula could be applied uniformly to every real-estate project.

It also rejected the argument that the Commencement Certificate, issued on September 4, 2017, after the introduction of GST, made the pre-GST data irrelevant.

"...The Commencement Certificate dated 04.09.2017 does not, by itself, render the pre-GST purchase and credit data irrelevant, subject to the project-specific nexus of the underlying transactions. The revised computation determines the benefit at Rs. 43.56 per sq. ft. and the total profiteered amount at Rs. 1,63,22,724/-, inclusive of GST at 12%", it said.

The Tribunal observed that the date of formal commencement of construction did not, by itself, establish that no project-related purchases or eligible tax credits existed before GST. The builder had also failed to establish that the pre-GST transactions relied upon by the DGAP related to another project.

Following further examination of the project area, the DGAP revised its computation by adopting a total area of 5,36,891 square feet and an eligible sold area of 3,34,570 square feet. The revised benefit was calculated at ₹43.56 per square foot, resulting in a base profiteered amount of ₹1,45,73,861.

After including GST at 12%, the total profiteered amount came to ₹1,63,22,724. The Tribunal accepted this revised computation and directed the builder to distribute the amount among the 188 eligible homebuyers in proportion to the benefit attributable to their respective units.

The Tribunal further directed Candeur Constructions to pay interest at 18% under Rule 133(3)(b) of the CGST Rules, 2017, from the date the higher amount was collected from each homebuyer until the corresponding benefit was passed on.

" insofar as the imposition of penalty under Section 171(3A) of the CGST Act, 2017 is concerned, the said provision came into force with effect from 01.01.2020. The period of investigation in the present case extends from 01.07.2017 to 31.03.2023 and, therefore, includes the period subsequent to the coming into force of the said provision..", it said.

It also held that the builder was liable to a penalty under Section 171(3A) of the CGST Act. However, no penalty would be leviable if the profiteered amount was deposited within 30 days of the order.

For Appellant: Shri Ajay Kumar Tehlan, Authorised Representative

For Respondent: Shri B. Veeresh, Chartered Accountant