Developer Not Liable For Profiteering When ITC Benefits Are Fully Passed to Buyers: GSTAT Delhi

On 20 January, the Delhi Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) closed anti-profiteering proceedings against Arkade Developers, holding that no contravention of Section 171 arises when Input Tax Credit (ITC) benefits are fully passed on to homebuyers.

The Tribunal noted that the developer had not only fully passed on Input Tax Credit (ITC) benefits to homebuyers but also slightly exceeded the statutory requirement

A Bench of Technical Member Anil Gupta took note of the re-investigation report submitted by the Directorate General of Anti-Profiteering (DGAP), which found that Arkade Developers had voluntarily complied with anti-profiteering rules, passing on ITC benefits to homebuyers slightly above the statutory requirement.

“10. Notably, the amount passed on by the Respondent to the Applicant (Rs. 1,40,732/-) exceeds the DGAP-computed profiteering amount of Rs. 1,37,672/- by a margin of Rs. 3,060/-. This demonstrates the Respondent's prudent intent to ensure that the Applicant received no less than the statutory entitlement under Section 171, and in fact, received marginally more than the computed benefit. This overpayment reflects the Respondent's commitment to full and fair discharge of its statutory obligations. The DGAP has verified and authenticated all these documentary proofs.”

The proceedings had arisen from a homebuyer's complaint alleging that Arkade Developers had not fully passed on ITC benefits under Section 171 of the CGST Act, 2017, in respect of construction services for the 'Arkade Earth – Bluebell' project. Following an initial prima facie finding of profiteering in 2023, DGAP had conducted a detailed investigation.

Pursuant to the Delhi High Court's judgment in Reckitt Benckiser India, which endorsed the area-based method over the ITC-to-turnover ratio, DGAP re-investigated the developer in 2024.

The investigation period spanned from 1 July 2017, when GST was implemented, to 12 April 2021, the date the Occupancy Certificate (OC) was issued. The focus was on post-GST buyers, as ITC benefits cease to accrue after the OC, ensuring that benefits were appropriately passed on during the GST period.

GSTAT Delhi concluded that no statutory violation had occurred. It further noted that the developer's overpayment demonstrated a “prudent intent” and a commitment to a “full and fair discharge” of statutory duties.

The Tribunal accepted the DGAP report in full, officially closing the case and concluding that there was no contravention of Section 171 of the CGST Act, 2017.