GSTAT Delhi Directs Builder To Pay ₹31.20 Lakh To 66 Homebuyers For Failure To Pass On ITC Benefit

The Principal Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) at Delhi, on 30 September directed Mangalbela Real Estates Pvt. Ltd. to pay Rs. 31.20 lakh to 66 homebuyers of its Atri Green Valley Project in Kolkata, along with 18% annual interest.

A Single Member Bench of Technical Member Anil Kumar Gupta rejected the company's objections to the re-investigation and held that it had violated Section 171(1) of the Central Goods and Services Tax (CGST) Act, 2017, by failing to pass on the benefit of additional Input Tax Credit (ITC) to homebuyers. He observed:

“...The Respondent has not challenged the entitlement of the 66 eligible homebuyers, the total saleable area, the sold area, the per square feet benefit, or the aggregate profiteered amount.”

The case arose from a complaint alleging that Mangalbela Real Estates had failed to pass on the additional ITC benefit to homebuyers after the introduction of GST.

Following a re-investigation, the Directorate General of Anti-Profiteering (DGAP) found that the company's available ITC had increased from 2.37% in the pre-GST period to 8.42% after GST was introduced. The DGAP calculated the profiteered amount at Rs. 27.86 lakh. Including Rs. 3.34 lakh in GST, the total amount payable to the 66 eligible homebuyers came to Rs. 31,20,542.

The company challenged the re-investigation, arguing that the Competition Commission of India lacked the authority to reopen the proceedings and that the investigation was barred by limitation.

Rejecting these objections, the Tribunal held that the re-investigation followed the Delhi High Court's ruling in Reckitt Benckiser India Pvt. Ltd. v. Union of India, which had found the earlier methodology for calculating profiteering in real estate projects to be flawed. It also held that the time limit for submitting the investigation report under the CGST Rules was directory and that the delay did not invalidate the proceedings.

Further, the Bench noted that the company had neither challenged the DGAP's calculations nor produced evidence to establish that it had passed on the ITC benefit to the homebuyers.

It also clarified that no penalty was payable under Section 171(3A) of the CGST Act because the alleged profiteering period ended before the provision came into force on 1 January 2020.

Accordingly, the GSTAT directed Mangalbela Real Estates to pay Rs. 31,20,542 to the 66 homebuyers in proportion to their respective sold areas within three months, along with 18% annual interest from the date the benefit accrued until payment.