GSTAT Orders LIC HFL Care Homes To Refund Rs 2.31 Crore To 240 Homebuyers For GST Profiteering

The GST Appellate Tribunal (GSTAT) at Delhi has held LIC HFL Care Homes Ltd. guilty of profiteering and directed it to refund Rs 2.31 crore with 18% interest to 240 homebuyers for failing to pass on additional input tax credit (ITC) benefits available after the introduction of GST from July 1, 2017.

A coram of President Justice Sanjaya Kumar Mishra and Technical Member A. Venu Prasad passed the order in proceedings arising from an investigation by the Director General of Anti-Profiteering (DGAP).

The case stems from a complaint by a homebuyer in the developer's “Jeevan Ananda” project in Bhubaneswar alleging that the developer did not pass on ITC benefits by way of commensurate reduction in flat prices post-GST, despite charging GST at 12%. The DGAP found that the developer retained tax benefits instead of passing them on.

Earlier, the National Anti-Profiteering Authority had confirmed profiteering. The Delhi High Court later remanded the matter for fresh determination in light of its ruling in Reckitt Benckiser India Pvt. Ltd., holding that no uniform formula can be applied and methodology must be case-specific.

Upon reinvestigation, the DGAP pegged the profiteered amount at Rs 2,31,93,107 for the period July 2017 to November 2019. The analysis showed that no ITC had been availed in the pre-GST period, whereas post-GST, credit equivalent to 17.99% of the purchase value became available, lowering the developer's overall cost.

Rejecting the developer's contention that only ITC on construction materials should be considered, the Tribunal held that benefits on both goods and services must be passed on. It also relied on the developer's prior admission of profiteering.

The tribunal observed, "It is a foundational principle in legal evidence that 'what is admitted need not be proved'. The rationale is simple: if a party voluntarily acknowledges a fact against their own interest, there is high presumption of truth. In the context, the document we have reviewed, reveals a fact that there has been a admission before the erstwhile NAA as wells as Delhi High Court that the Respondent has profiteered by introduction of the GST regime and is ready to repay the amount.”

On computation, the Tribunal upheld the DGAP's method of calculating total ITC savings and allocating them to buyers on a per square foot basis

It also rejected the argument that unavailed CENVAT credit in the pre-GST regime should be considered, holding that failure to claim such credit cannot absolve the developer of its obligation to pass on benefits.

Accordingly, the tribunal directed refund of Rs 2,07,08,131 as base profiteering along with GST of Rs 24,84,976, totaling Rs 2,31,93,107, with 18% interest from the date of payment of the last installment by each homebuye. This is to be paid within three months.

For DGAP: Suneel Kumar, Additional Assistant Directors - Authorised Representative, assisted by Shri Ravi Passi, Inspector

For Respondent:Dinesh Aggarwal, Chartered Accountant, Advocates Pranay Sahay and Upkar Agrawal