GSTAT Delhi Bench Sets Aside Profiteering Proceedings Against Vertex Homes Over ITC Benefit

The GST Appellate Tribunal (GSTAT), Delhi, on 2 September set aside profiteering proceedings against Vertex Homes Pvt. Ltd. concerning its “Vertex Panache” project in Hyderabad, after finding that the increase in construction costs had offset the benefit of additional Input Tax Credit (ITC).

A Bench comprising Technical Member Anil Kumar Gupta accepted the Directorate General of Anti-Profiteering's (DGAP) revised calculation of nil profiteering, after it deducted Rs. 3.49 crore in verified cost escalation from the developer's additional ITC benefit of Rs. 2.47 crore. The Tribunal held:

“...The benefit of the additional ITC was entirely offset by the substantial increase in the cost of construction materials. This conclusion is further fortified by the letter dated 19.08.2026 filed by the Respondent, wherein it has unequivocally accepted the DGAP's findings and the consequential determination of Nil profiteering.”

The proceedings arose from a complaint by a resident of the project alleging that Vertex Homes had failed to pass on the benefit of ITC after the introduction of GST.

In its original investigation report dated 27 August 2025, the DGAP had calculated profiteering of Rs. 73 lakh, comprising Rs. 65.17 lakh as the base profiteered amount and Rs. 7.82 lakh as GST, which was required to be passed on to 140 homebuyers.

Before the Tribunal, Vertex Homes submitted that the increase in construction material costs had substantially offset the additional ITC benefit.

The developer stated that the budgeted construction cost of the project was Rs. 156.94 crore, while the actual expenditure was Rs. 161.06 crore, resulting in an increase of Rs. 4.11 crore. It submitted that the prices of Ready-Mix Concrete (RMC), sand and bricks had increased by 19.87%, 62.98% and 73.17%, respectively. The escalation in the prices of these materials alone, according to the developer, resulted in additional expenditure of Rs. 3.49 crore.

Vertex Homes relied on a Chartered Accountant's certificate dated 25 June 2026 certifying the additional expenditure of Rs. 3.49 crore based on its books of account, cost records and purchase records.

In its clarification dated 30 July 2026, the DGAP accepted the cost escalation claim after examining the Chartered Accountant's certificate and sample invoices. It deducted the Rs. 3.49 crore cost escalation from the additional ITC benefit of Rs. 2.47 crore, resulting in negative net savings of Rs. 1.02 crore and nil profiteering.

The Tribunal noted that the cost escalation was supported by the Chartered Accountant's certificate and had been verified and accepted by the DGAP.

Referring to the Delhi High Court's decision in Reckitt Benckiser India Pvt. Ltd. v. Union of India, the Bench observed that genuine commercial factors, including cost escalation, could be considered while determining whether a benefit arising from tax reduction or additional ITC had actually resulted in profiteering.

Accordingly, the GSTAT accepted the DGAP's original report read with its subsequent clarification and held that Vertex Homes had not contravened Section 171 of the CGST Act. It disposed of the proceedings with nil profiteering.