Bengaluru Builder Directed to Pass On Rs. 1.63 Crore ITC Benefit to 188 Homebuyers: GSTAT Principal Bench Upholds DGAP’s Purchase-Value Methodology

The Tribunal held that comparing credit to purchase value before and after GST is not the ITC-to-turnover method rejected in Reckitt Benckiser, and that a post-GST commencement certificate does not make pre-GST project data irrelevant.

The Principal Bench of the GST Appellate Tribunal has held that a Bengaluru developer profiteered Rs. 1,63,22,724, inclusive of 12% GST, in its residential project “Candeur Carlisle” and directed it to pass on the amount to 188 eligible homebuyers with interest at 18% [DGAP v. Candeur Constructions].

The bench of Justice Mayank Kumar Jain, Member (Judicial) and A. Venu Prasad, Member (Technical) noted that the DGAP found the ratio of credit to purchase value rose from 6.66% before GST to 8.36% after GST, a difference of 1.70%. The project-level saving was divided by the total project area to arrive at a benefit of Rs. 43.56 per sq. ft., which was applied to the 3,34,570 sq. ft. sold before the Occupancy Certificate. Since the developer bore the entire construction cost under the joint development agreement, buyers of the landowner’s units sold before the certificate were also covered.

Rejecting the developer’s challenge, the Tribunal held that the Delhi High Court in Reckitt Benckiser India Pvt. Ltd. v. Union of India had found fault only with comparing ITC to turnover, since turnover and ITC do not move together in a real estate project. Relying on the Delhi High Court’s later decision in LICHFL Care Homes Ltd. v. DGAP, it held that using purchase value as the denominator and distributing the saving per square foot has a rational nexus with project expenditure.

The Tribunal also rejected the argument that construction began only after GST, as shown by the Commencement Certificate dated 04.09.2017. It held that the certificate does not by itself establish the absence of project-related purchases and credits before 01.07.2017, and the developer had not shown that its own pre-GST figures related to another project. The complainant’s reliance on a general CREDAI estimate of a 3–5% cost reduction was declined as not project-specific.

The developer is also liable to penalty under Section 171(3A), which will not be levied if the profiteered amount is deposited within thirty days. The ruling contrasts with the Bench’s order last week in Savaliya Procon, where the same methodology showed a fall in the credit ratio and no profiteering was found.

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