The GST Appellate Tribunal has confirmed anti-profiteering liability against Anuhar Homes Pvt. Ltd. in relation to its residential project “Morning Raaga” at Alkapur Township, Manikonda, Hyderabad. The proceedings originated from a complaint by a homebuyer alleging that although GST at 12% had been charged on payments towards the flat, the benefit arising from additional Input Tax Credit available after introduction of GST had not been passed on through a commensurate reduction in price.
The project was developed by Anuhar Homes Pvt. Ltd. under a Joint Development Agreement with the landowner, N. Rami Reddy. Following investigation and subsequent reinvestigation pursuant to the Delhi High Court’s judgment in Reckitt Benckiser India Pvt. Ltd. v. Union of India, the DGAP examined the actual tax credits and project-related purchases for the relevant period.
Additional ITC Benefit Identified by DGAP
The DGAP found that during the relevant pre-GST period, no eligible CENVAT credit of Central Excise Duty or VAT was available in respect of the project. After introduction of GST, however, the developer became entitled to Input Tax Credit on inputs and input services used for construction.
The investigation recorded post-GST purchases of goods and services of approximately ₹16.34 crore and GST ITC of ₹1.73 crore, resulting in an ITC-to-purchase-value ratio of 10.63%. The DGAP therefore treated 10.63% as the additional ITC benefit arising under the GST regime.
After allocating the benefit with reference to the project’s saleable area and sold area, the DGAP determined the base profiteered amount at ₹84,94,491. GST at 12% amounting to ₹10,19,338 was added, taking the total profiteered amount to ₹95,13,829.
GSTAT: Additional ITC Must Be Passed to Homebuyers
The Tribunal reiterated that Section 171(1) of the CGST Act requires the benefit of additional Input Tax Credit to be passed on to recipients through a commensurate reduction in prices.
GSTAT observed that the revised calculation was based upon the records and returns furnished by the developer itself. Anuhar Homes did not place any material before the Tribunal demonstrating an error in the computation, nor did it produce evidence establishing that the quantified ITC benefit had actually been passed on to the eligible homebuyers.
The Tribunal therefore accepted the DGAP’s computation and held that failure to pass the additional ITC benefit constituted a contravention of Section 171(1).
Notification No. 19/2024 Does Not Terminate Pending Cases
A significant issue before GSTAT concerned Notification No. 19/2024-Central Tax dated 30 September 2024, under which the authority would not accept requests for examination under Section 171 from 1 April 2025.
The developer argued that because the notification contained no express saving clause, pending anti-profiteering proceedings could not continue after that date.
GSTAT rejected this interpretation. It held that the notification is prospective and merely prevents the acceptance of fresh requests for examination from 1 April 2025. It does not state that investigations or adjudicatory proceedings already commenced before that date would abate or stand terminated.
Since the present proceedings arose from a complaint instituted much earlier, they could not be regarded as a fresh request falling within the restriction introduced by the notification.
Pendency Before Supreme Court Is Not a Ground to Keep Proceedings in Abeyance
Anuhar Homes also sought deferment of the matter on the ground that the validity of the anti-profiteering provisions was under consideration before the Supreme Court in proceedings including Excel Rasayan Pvt. Ltd.
GSTAT held that the mere pendency of a challenge before a higher judicial forum does not operate as a stay. Unless the relevant statutory provisions or the governing judgment are specifically stayed by a competent court, authorities and tribunals remain bound to adjudicate cases according to the law presently in force.
As no stay order affecting Section 171, the DGAP investigation or the proceedings before GSTAT had been produced, the Tribunal found no legal basis to keep the case in abeyance.
Final Order
GSTAT affirmed the DGAP’s findings and held that Anuhar Homes had profiteered ₹95,13,829, inclusive of GST at 12%, by failing to pass the additional Input Tax Credit benefit to eligible homebuyers.
The developer was directed to pass on the entire amount of ₹95,13,829 together with interest at 18%, calculated from the date on which the higher amounts were collected until their actual return to the eligible homebuyers. Compliance with the order is required within three months.
The Tribunal, however, held that no penalty was leviable because the period of contravention did not extend beyond 1 January 2020, the date from which Section 171(3A) came into force.
Key Legal Takeaway
The ruling clarifies that the benefit of additional ITC arising after implementation of GST cannot be retained by a real-estate developer where Section 171 requires the benefit to be transmitted to purchasers through a corresponding price reduction. It also makes an important distinction between the closure of the anti-profiteering mechanism for new requests after 1 April 2025 and the continuation of proceedings already instituted before that date.
Further, the Tribunal reaffirmed that pendency of a statutory or constitutional challenge before the Supreme Court does not, without an operative stay, prevent adjudication under the prevailing law.