The Principal Bench of the Goods and Services Tax Appellate Tribunal (GSTAT), Delhi, has held that there was no profiteering under Section 171 of the CGST Act where the ratio of Input Tax Credit (ITC) to purchase value decreased after the implementation of GST.
The ruling came in proceedings concerning IREO Grace Realtech Pvt. Ltd., developer of the real estate project “The Corridors” at Sector 67A, Gurugram. The tribunal relied upon a fresh investigation by the Directorate General of Anti-Profiteering (DGAP), which found that the ITC-to-purchase-value ratio had actually declined after GST came into force.
Background of the Profiteering Complaint
The proceedings originated from a complaint filed by Sandeep Bansal, Pratibha Bansal and Nupur Bansal in relation to construction services provided by IREO Grace Realtech Pvt. Ltd.
The applicants alleged that the developer had received the benefit of additional ITC following the introduction of GST on 1 July 2017, but had failed to pass on the corresponding benefit to customers through a commensurate reduction in prices.
Such allegations are examined under Section 171 of the Central Goods and Services Tax Act, 2017, which contains the anti-profiteering provision requiring businesses to pass on the benefit arising from a reduction in tax rates or an increase in ITC to recipients through a corresponding reduction in prices.
Earlier Investigation and Fresh Examination
The matter had an earlier procedural history. The initial investigation by the anti-profiteering authorities had resulted in a finding that Section 171 had been contravened.
However, the matter was subsequently reconsidered following judicial scrutiny of the methodology adopted for determining profiteering in the real estate sector. The case was therefore remanded for a fresh investigation.
During the fresh examination, the DGAP analysed the ITC available in relation to the purchase value during the relevant pre-GST and post-GST periods.
ITC-to-Purchase Ratio Declined After GST
The fresh DGAP investigation produced a significant finding.
According to the report, the ITC-to-purchase-value ratio was 4.66% during the pre-GST period, whereas it stood at 4.54% during the post-GST period.
Thus, rather than witnessing an increase in the proportion of ITC available after GST implementation, the ratio declined by 0.12 percentage points.
On this basis, the DGAP concluded that there was no additional ITC benefit that could be treated as having been retained by the respondent for the purpose of Section 171.
The reduction in the ratio was therefore an important factor in determining that there was no profiteering requiring further action.
GSTAT’s Findings
The matter came before the Principal Bench of GSTAT, Delhi, comprising A. Venu Prasad, Technical Member.
The tribunal considered the fresh DGAP investigation and observed that the investigation did not establish any increase in the ITC-to-purchase-value ratio after the implementation of GST.
The tribunal specifically noted that the percentage ratio of ITC to purchase value had not increased from the pre-GST period to the post-GST period.
Consequently, the fundamental basis for alleging profiteering was not established in the fresh investigation.
The tribunal also took note of the fact that none of the applicants or the respondent was represented during the proceedings. Further, one of the applicants informed the authorities that the disputes between the parties had been amicably resolved.
No Violation of Section 171
After considering the fresh investigation report, GSTAT accepted the DGAP’s conclusion and held that there was no contravention of Section 171 of the CGST Act.
Since the post-GST ITC-to-purchase ratio was lower than the pre-GST ratio, the tribunal found no basis to conclude that the respondent had retained an additional ITC benefit that was required to be passed on to the customers.
Accordingly, the anti-profiteering proceedings were disposed of.
Key Takeaway for Real Estate Developers
The decision highlights the importance of adopting an appropriate and evidence-based methodology while determining GST profiteering in the real estate sector.
A mere allegation that a developer received ITC after the introduction of GST may not, by itself, establish profiteering. The relevant comparison must demonstrate that an additional benefit was actually available and that such benefit was not appropriately passed on to customers.
The IREO Grace Realtech ruling therefore reinforces the significance of examining the actual ITC-to-purchase relationship before arriving at a conclusion under Section 171.
Case Details
| Particulars | Details |
|---|---|
| Case Title | DGAP Vs. IREO Grace Realtech Pvt. Ltd. |
| Case No. | NAPA/159/PB/2025 |
| Forum | GSTAT, Principal Bench, Delhi |
| Project | The Corridors, Sector 67A, Gurugram |
| GSTIN | 06AADCG9136D1ZS |
| Issue | Alleged GST profiteering under Section 171 |
| Pre-GST ITC/Purchase Ratio | 4.66% |
| Post-GST ITC/Purchase Ratio | 4.54% |
| Change | Decrease of 0.12 percentage points |
| Outcome | No violation of Section 171; proceedings disposed of |