Interest On Profiteered Amounts Must Run From Date of Collection: GSTAT New Delhi

The Principle Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) at New Delhi on 20 March held that interest on profiteered amounts must be paid from the date of collection of excess amounts.

A Single Member Bench comprising Technical Member A. Venu Prasad rejected the contention that interest should run only from project completion. He wrote:

“Rule 133(3)(b)… expressly empowers the Authority to order return of the amount… along with interest… from the date of collection of the higher amount till the date of its return. The provision is mandatory in nature”, while directing a real estate developer to refund ₹11,91,763 to homebuyers.

An anti-profiteering case was initiated against Pacific Development Corporation Ltd., for alleged failure to pass on input tax credit benefits under Section 171 of the Central GST Act. This provision mandates that any reduction in tax or benefit of input tax credit must be passed on to consumers through reduced prices.

The DGAP had found that the ratio of input tax credit to purchase value increased from 3.11% in the pre-GST period to 3.34% post-GST, resulting in a benefit that should have been passed on to homebuyers.

Pacific Development Corporation accepted the DGAP findings but argued against imposition of interest. It sought limitation of interest from the date of completion of the certificate.

The Tribunal rejected this contention, clarifying that the statutory obligation to pass on benefits arises “at the time of supply itself,” and retention of such benefit constitutes excess consideration.

It further observed that interest is compensatory in nature and ensures restitution of the time value of money to buyers. It held Pacific Development liable to pay interest at 18% per annum from the date of collection of excess amounts until refund.

Accordingly, the GSTAT directed refund of Rs. 11,91,763 along with interest to eligible homebuyers and directed compliance within three months.