Delhi High Court Validates DGAP's Real Estate Anti-Profiteering Methodology, Rejects Hypothetical CENVAT Credit Claims

The transition to the Goods and Services Tax (GST) regime introduced a critical mandate for businesses: the obligation to pass on the benefits of increased Input Tax Credit (ITC) or reduced tax rates to consumers. Enshrined in Section 171 of the Central Goods and Services Tax Act, 2017, this anti-profiteering provision has been a subject of intense litigation, particularly within the real estate sector.

In a significant judicial development, the Delhi High Court, vide its judgment dated 28/09/2026, dismissed a writ petition in the case of LICHFL Care Homes Limited Vs Director General of Anti-Profiteering. The Court upheld the order passed by the Goods and Services Tax Appellate Tribunal (GSTAT), which validated the revised methodology adopted by the Directorate General of Anti-Profiteering (DGAP) for calculating profiteered amounts. This comprehensive summary delves into the factual matrix, the legal arguments advanced by the assessee, and the High Court's definitive ruling on the actual availment of ITC versus hypothetical eligibility.

Factual Matrix of the Dispute

The controversy centered around a residential real estate project named "Jeewan Anand," developed by the assessee in Bhubaneswar, Odisha. The construction lifecycle of the project spanned from 2011 to November 2019, thereby overlapping both the pre-GST and post-GST tax regimes.

The Initial Anti-Profiteering Proceedings

The genesis of the dispute was a complaint filed by a homebuyer alleging that the assessee failed to pass on the commensurate benefits of ITC accrued under the newly implemented GST framework. Following an investigation, the DGAP issued its initial report on 28.01.2021, concluding that the assessee had profiteered to the tune of Rs.1,85,70,263/- during the period spanning July 2017 to September 2020. This determination was subsequently confirmed by the erstwhile National Anti-Profiteering Authority (NAPA) via an order dated 20.06.2022.

The Impact of the Reckitt Benckiser Precedent

The assessee challenged the NAPA order before the Delhi High Court. During the pendency of this challenge, the High Court delivered a landmark judgment in Reckitt Benckiser India Pvt. Ltd. v. Union of India. In that judgment, the Court critically analyzed the standard methodology deployed by anti-profiteering authorities for the real estate sector—specifically, the comparison of the ITC-to-turnover ratio between the pre-GST and post-GST periods.

The Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India ruled that this methodology was fundamentally flawed for real estate projects, as turnover and ITC accrual do not maintain a direct, uniform correlation throughout a project's lifecycle. Consequently, the Court directed that the total savings generated by the introduction of GST must be calculated on a project-wise basis and then divided by the total project area to determine the exact benefit per square foot. Based on this precedent, the assessee's case was remanded for fresh determination on 25.04.2024.