In a precedent-setting order consolidating post-Reckitt Benckiser anti-profiteering principles, the GST Appellate Tribunal (GSTAT) has confirmed contravention of Section 171 of the CGST Act, 2017 by Transcon Sheth Creators Pvt. Ltd. and mandated uniform per-square-foot distribution of ITC benefit to all eligible homebuyers. The Tribunal accepted the DGAP’s re-investigation report and directed refund of ₹1,00,67,677 (including GST) with interest to 340 buyers within 30 days.
Procedural Genesis and Remand
The proceedings originated from complaints alleging non-passing of ITC benefits in a residential project (“Auris Serenity Tower-2”, Malad West, Mumbai). After a prima facie finding by the Standing Committee, DGAP’s initial report held contravention. Following the Delhi High Court’s ruling in Reckitt Benckiser India Pvt. Ltd. v. Union of India (29.01.2024), the matter was remanded for re-investigation, requiring a methodology consistent with the High Court’s guidance, particularly the rejection of ITC-to-turnover ratios and the adoption of area-based computation in real estate cases.
Legal Framework: Section 171 and Methodology Post-Reckitt
Section 171 obligates suppliers to pass on benefits arising from tax rate reductions or additional ITC by commensurate price reduction. The High Court clarified that:
- No universal formula applies across industries.
- In real estate, turnover is not a reliable proxy for ITC benefit.
- The correct approach is to compute total project-level savings attributable to GST and allocate uniformly per square foot, ensuring equal benefit for equal area.
DGAP’s Area-Based Computation (Accepted by GSTAT)
Pursuant to remand, DGAP adopted a project-wise, area-based methodology:
- Total flats: 340; Total saleable area: 3,69,171 sq. ft. (all sold prior to OC dated 20.12.2021).
- Pre-GST credit ratio (credit/purchase value): 12.40%.
- Post-GST net ITC ratio: 12.83%.
- Incremental benefit: 0.43 percentage points.
- Project-level savings: ₹89,88,997.
- Uniform per-sq-ft benefit: ₹24.35/sq. ft.
- GST @12% on construction service: ₹10,78,680.
- Total profiteered amount: ₹1,00,67,677.
The Respondent unequivocally accepted the DGAP findings and undertook to pass on the benefit, a factor noted by the Tribunal in closing proceedings while confirming contravention.
Tribunal’s Findings and Directions
GSTAT:
- Confirmed contravention of Section 171.
- Accepted DGAP’s area-based methodology aligned with Reckitt.
- Directed refund of the entire profiteered amount with interest under Rule 133(3)(b) to all 340 eligible buyers, proportionate to unit area, within 30 days.
- Required compliance reporting to DGAP/jurisdictional authorities; proceedings closed.
Jurisprudential Significance
- Uniformity Principle: Equal area must receive equal benefit, per-square-foot allocation is mandatory in real estate anti-profiteering.
- Methodological Finality: Reinforces area-based computation as the preferred approach post-Reckitt, displacing turnover-linked ratios.
- Project-Level Lens: Focus on total GST-induced savings across the project lifecycle up to OC.
- Compliance Incentive: Voluntary acceptance does not dilute liability but facilitates closure with clear timelines.
Practical Implications
- Developers must recalibrate pricing and benefit-passing mechanisms to area-based distribution and maintain CA-certified project records.
- DGAP/Authorities gain a validated template for re-investigations post-remand.
- Homebuyers receive enforceable assurance of uniform benefit, irrespective of booking dates (within eligibility).
Conclusion
The GSTAT’s order decisively anchors anti-profiteering enforcement in real estate to a uniform per-square-foot paradigm, harmonising administrative practice with constitutional scrutiny articulated in Reckitt Benckiser. The ruling enhances predictability, equity, and compliance discipline under Section 171.
Source: GSTAT Ruling dated 21/01/2026: DGAP Vs Transcon Sheth Creators Pvt. Ltd