Homebuyers’ Anti-Profiteering Complaint Dismissed Where Entire Construction Occurred Under GST

Introduction

The Principal Bench of the GST Appellate Tribunal (GSTAT) has recently clarified the reach of Section 171 of the CGST Act, 2017 in the context of a residential real estate project executed entirely after the introduction of GST. In DG Anti Profiteering Vs Arun Excello Constructions LLP (GSTAT), the Tribunal upheld the findings of the Directorate General of Anti-Profiteering (DGAP) and rejected an assessee’s plea that the builder had profiteered by not passing on alleged Input Tax Credit (ITC) benefits.

The ruling is important for:

  • Real estate developers executing projects wholly in the GST era, and
  • Homebuyers seeking relief under the anti-profiteering framework in such scenarios.

It reiterates that where the construction and sale both take place entirely after 01.07.2017 and prices are fixed in contemplation of GST and available ITC, the anti-profiteering provisions do not mandate any separate ITC-based reduction in prices.

Factual Background

The Project and Parties

  • **Respondent (Builder)😗* M/s Arun Excello Construction LLP, a Chennai-based real estate developer.
  • Project: “Compact Homes–Narmada”, comprising:
    • 336 residential units
    • Total saleable area of 2,07,720 sq. ft.
    • All flats booked prior to completion of the project
  • Period of Investigation: 01.04.2017 to 31.09.2024
  • **Applicant (Homebuyer)😗* Shri Selvakumar V, purchaser of Flat No. B4/4419 in the said project.

The Respondent opted to continue under the old GST scheme w.e.f. 01.04.2019, where:

  • Effective GST rate was 12% (after 1/3rd abatement towards land), and
  • Full ITC continued to be available.

Trigger for Anti-Profiteering Proceedings

The Applicant alleged that:

  • After introduction of GST on 01.07.2017, the Respondent failed to pass on ITC benefits by appropriately reducing the price of the flat,
  • Thus, the Respondent had contravened Section 171 of the CGST Act, 2017 in respect of construction services supplied under the “Compact Homes–Narmada” project.

The complaint was first examined by the Standing Committee on Anti-Profiteering, which then referred the matter to the DGAP under Rule 129(1) of the CGST Rules, 2017 for detailed investigation.

DGAP Investigation and Findings

Scope of Investigation

The DGAP issued notice to the Respondent requiring it to:

  1. Explain whether ITC benefits arising on or after GST introduction had been passed on to allottees by proportionate reduction in prices, and
  2. If so, to submit a self-computation of the ITC benefit passed on.

The Respondent filed written submissions, supported by documents, denying any profiteering.

Methodology Adopted by DGAP

The DGAP compared:

  • The ratio of eligible credit to net purchase value (excluding taxes and duties) in the pre-GST period, and
  • The same ratio in the post-GST period,

for the project “Compact Homes–Narmada”. The objective was to determine whether there was any incremental ITC benefit attributable to the GST regime.

The key figures, as recorded in the report dated 28.02.2025, were:

  • Pre-GST Period

    • Purchase value of goods and services (excluding taxes/duties): Rs. 20,00,845/-
    • Credit of Service Tax availed: Rs. 2,90,122/-
    • Credit of VAT availed: Nil
    • Total credit availed: Rs. 2,90,122/-
    • Ratio of credit to purchase value: 14.50%

  • Post-GST Period

    • Purchase value of goods and services (excluding taxes/duties): Rs. 24,83,73,923/-
    • Net GST ITC availed: Rs. 3,54,76,619/-
    • Ratio of credit to purchase value: 14.28%

  • Difference in Ratio: 14.28% – 14.50% = (-0.22%)

DGAP’s Conclusion

On the basis of this comparative ratio:

  • The credit-to-purchase ratio had declined post-GST instead of increasing.
  • Therefore, no additional or incremental ITC benefit accrued to the Respondent due to GST implementation.

Consequently:

  • There was no obligation to pass on any ITC benefit to buyers under Section 171,
  • No contravention of Section 171 read with Rule 129(6) of the CGST Rules, 2017 was found, and
  • No profiteering was established.

Proceedings Before GSTAT

Jurisdiction of GSTAT

The Principal Bench of the GST Appellate Tribunal, constituted under Section 109(3) of the CGST Act, 2017, has been empowered to handle anti-profiteering appeals with effect from 01.10.2024, by Notification No. 18/2024-Central Tax dated 30.09.2024.

Following submission of the DGAP report (28.02.2025), GSTAT: