The Goods & Services Tax Appellate Tribunal (GSTAT), Principal Bench, New Delhi, has clarified that Section 171 of the CGST Act, 2017 applies only in cases involving a reduction in tax rate or an increase in Input Tax Credit (ITC), particularly in projects spanning pre-GST and post-GST periods. Where the entire spectrum of activities from inception to completion takes place during the post-GST period, no comparative ITC benefit arises for passing on, and no benefit of ITC would be available to the complainants as the price of the flat had been fixed after taking into account the incremental ITC that would have become available subsequent to the introduction of GST.
Justice Mayank Kumar Jain (Judicial Member) observed that the DGAP rightly concluded that the ratio of credit availed to purchase value was 12.26% in the pre-GST era, which declined to 11.02% in the post-GST period. The reduction of 1.24% implies that no benefit accrued to the Respondent, and hence the question of passing on any benefit to the recipient would not arise. The Tribunal observed that the Respondent has, therefore, not contravened the provision of Section 171 of the CGST Act read with Rule 129(6) of the CGST Rules, and the DGAP report dated Aug 21, 2025 deserves to be accepted.
The Tribunal observed that it is an admitted position that the booking of the unit, its allotment, execution of the agreement, the entire construction activities, as well as the receipt of payments made by the Complainants, all transpired in the post-GST era. The price of the unit was determined after factoring the benefit of ITC, which became available to the Respondent in the post-GST regime and was not admissible under the pre-GST regime, and on the basis of prevailing rates applicable during the GST regime.
Further, the Tribunal observed that the expressions used in clause (d) of paragraph 128 of the Reckitt Benckiser judgment do not mean that it would be applicable only if the construction of the flat has been completed at the time of agreement. The fact that the construction of the flat was yet to be raised or the property was not fully constructed is of no consequence; what is crucial is that the entire spectrum of activities from inception to completion must have taken place during the post-GST period.
Also, the Tribunal observed that the case of the Respondent is fully covered by the findings given by the Hon’ble High Court of Delhi in paragraph 128(d) of the judgment passed in Reckitt Benckiser, and thus, the Complainants have no locus standi and legal rights to contest the DGAP report.
Briefly, the Complainants filed an application alleging that the Respondent (Sobha Limited) did not pass on the benefit of input tax credit (ITC) on the introduction of GST with effect from July 01, 2017, by way of commensurate reduction in the prices of a flat purchased by them in the project ‘International City’ situated at Gurugram, Haryana. The Standing Committee on Anti-Profiteering examined the application and referred the matter to the Director General of Anti-Profiteering (DGAP) for detailed investigation under Rule 129(1) of the CGST Rules, 2017.
Upon completion of the investigation, the DGAP submitted a report observing that the ratio of credit availed to purchase value stood at 12.26% during the pre-GST regime, which declined to 11.02% subsequent to the introduction of GST. The resultant difference of -1.24% indicated that no incremental benefit accrued to the Respondent, and consequently, the question of passing on any benefit to the recipient did not arise.
The Complainants had sought allotment for the purchase of Duplex Villa through an application dated June 17, 2019, and the parties entered into a Builder and Buyer Agreement (BBA) on July 08, 2019. The entire payment was made by the Complainants after the introduction of GST, and the Occupation Certificate was issued to the Respondent on Feb 26, 2024. The Respondent filed preliminary objections challenging the maintainability of the proceedings, arguing that the prices were determined after factoring in the availability of ITC in the post-GST regime, and relied upon paragraph 128(d) of the judgment of the High Court of Delhi in Reckitt Benckiser India Pvt Ltd. v UOI [(2024) 14 Centax 374 (Delhi)].
Appearances:
Advocates Onkar Roy and Tarun Jain, for the Respondent/ Taxpayer
