Anti-Profiteering Interest Liability Arises At Time of Supply, Not Completion Certificate: GSTAT Delhi

Recently, the Goods and Services Tax Appellate Tribunal (GSTAT), in New Delhi, held that liability to pay interest on profiteered amounts arises from the time of supply, that is, when excess consideration is collected from buyers, and not from the date of obtaining a completion certificate.

A Single Bench comprising Technical Member A. Venu Prasad passed the order on 19 March in an appeal filed by the Director General of Anti-Profiteering (DGAP) against Unnathi Associates, developer of the “Raunak Heights” project in Thane.

The Bench observed:

“Section 171 creates a statutory obligation to pass on benefits at the time of supply itself. The amount not passed on must be returned with interest at 18% per annum from the date of collection of the higher amount till the date of return.”

The DGAP had conducted an investigation under Section 171 of the Central Goods and Services Tax Act, 2017, which requires that any benefit from tax reduction or input tax credit be passed on to consumers through commensurate price reduction.

The investigation found that input tax credit increased from 7.67% in the pre-GST period to 12.08% post-GST, resulting in additional benefit that should have been passed to buyers. The total profiteering was calculated at Rs. 42,02,357, of which Rs. 35,48,496 had already been refunded, leaving Rs. 6,53,861 unpaid. The Respondent accepted the DGAP's findings and submitted proof of partial refunds.

On interest, the Respondent argued it should either not be payable or run only from the date of the completion certificate. The Tribunal rejected this, clarifying that Section 171 mandates passing benefits at the time of supply. It noted that interest is compensatory and ensures restitution of the time value of money.

Regarding penalty, the Tribunal observed that while there was contravention of Section 171(1), no penalty could be imposed because the relevant provision came into force after the period of violation and the Respondent had already refunded the amount.

Accordingly, the Tribunal directed Unnathi Associates to refund Rs. 6,53,861 with 18% interest to eligible homebuyers within one month and report compliance to the jurisdictional GST authorities.