DGAP Vs Pan Realtors Pvt. Ltd (GSTAT): Area-based GST profiteering calculation after Delhi High Court ruling

Background of the dispute

Proceedings in DGAP Vs Pan Realtors Pvt. Ltd originated from an anti-profiteering complaint under Section 171 of the Central Goods and Services Tax Act, 2017. The allegation was that the builder of the “PAN Oasis” project at Sector 70, Noida had enjoyed additional input tax credit (ITC) benefit under GST, but had not passed this benefit to homebuyers through commensurate price reduction.

The complaint, filed by Shri Umesh Kumar Shukla (the Applicant), related to construction services supplied by Pan Realtors Private Limited (the Respondent), registered under GST with number 09AAFCP2034D1ZS.

The matter travelled through multiple stages:

  • Initial investigation and report by the Director General of Anti-Profiteering (DGAP)
  • Directions for re-investigation by the erstwhile National Anti-Profiteering Authority (NAA)
  • A further, fresh re-investigation directed by the Competition Commission of India (CCI) in light of the landmark judgment of the Delhi High Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India & Ors. decided on 29.01.2024

Ultimately, the matter came before the Goods and Services Tax Appellate Tribunal (GSTAT), which examined the DGAP’s final re-investigation report dated 10.01.2025 and the conduct of the Respondent.

Reference to Delhi High Court’s ruling in Reckitt Benckiser

The turning point in this and several other real estate anti-profiteering cases was the judgment of the Delhi High Court in Writ Petition Civil No. 7743/2019, Reckitt Benckiser India Pvt. Ltd. v. Union of India & Ors., delivered on 29.01.2024. The Court:

  1. Scrutinized and critiqued the earlier approach of NAA and DGAP for computing profiteering in real estate cases.
  2. Clarified that:
    • There can be no rigid or single mathematical formula for determining profiteering (Para 124).
    • The ITC-to-turnover ratio method is inappropriate for real estate (Para 129).
    • An area-based approach, ensuring equal benefit per square foot for similarly situated buyers, is to be adopted.
  3. Outlined four distinct scenarios (Para 128) for entitlement to ITC benefits in real estate depending on:
    • Whether construction was completed pre-GST or post-GST.
    • Whether the buyer paid fully pre-GST or post-GST.
    • Whether the flat was purchased before or after completion.

These principles were central to the fresh re-investigation ordered in the present matter.

Initiation and course of investigation

Complaint and first round of proceedings

  • The Standing Committee on Anti-Profiteering, in its meeting on 11.04.2019, examined the complaint of the Applicant under Rule 128 of the CGST Rules, 2017.
  • Finding a prima facie case, the Committee forwarded the matter to the DGAP for detailed investigation under Rule 129.
  • The DGAP submitted an initial report on 31.01.2020 to the erstwhile NAA.
  • The NAA, by order dated 24.06.2022, directed re-investigation. In compliance, DGAP filed a subsequent report on 13.02.2022.

Fresh re-investigation after Delhi High Court ruling

After the Reckitt Benckiser judgment, the CCI, vide letter dated 21.03.2024, instructed DGAP to undertake a fresh re-investigation in this real estate case, aligning the methodology with the Delhi High Court’s reasoning, especially:

  • No uniform formula for all industries (Para 124)
  • Four scenario-based entitlement rules (Para 128)
  • Mandatory area-based computation instead of ITC-to-turnover ratio (Para 129)

Pursuant to this direction, DGAP issued a Notice dated 12.04.2024 under Rule 129, asking the Respondent:

  • Whether it admits non-passing of ITC benefit.
  • If yes, to self-determine the quantum of benefit and support it with documents.