Introduction
The Goods and Services Tax (GST) regime in India, since its inception in July 2017, incorporated robust anti-profiteering provisions under Section 171 of the Central Goods and Services Tax Act, 2017. The objective was to ensure that any benefit arising from a reduction in tax rates or availability of Input Tax Credit (ITC) is passed on to the consumers by way of commensurate reduction in prices.
The recent ruling by the National Anti-Profiteering Authority (NAA) in the case of M/s Ireo Waterfront Pvt. Ltd., dated 27th September 2024, marks a significant development in the evolving jurisprudence under these provisions. This article analyses the order, its implications, and key takeaways for businesses and professionals.
Factual Background
The matter originated from an application filed by a homebuyer, alleging that M/s Ireo Waterfront Pvt. Ltd. did not pass on the benefit of ITC availed post-GST implementation, thereby violating the anti-profiteering provisions.
The DGAP (Director General of Anti-Profiteering), in accordance with Rule 129 of the CGST Rules, 2017, initiated an investigation and submitted its findings before the NAA.
Key Observations by DGAP & NAA
- Nature of the Project:
The respondent was engaged in the construction and development of residential apartments under the project “Ireo Waterfront”. - ITC Availability and Reversal:
- The DGAP examined the ITC availed before and after GST rollout.
- It was found that although ITC was availed post-GST, the respondent had reversed the entire amount of ITC, which effectively nullified any benefit that could have been retained.
- Pricing and Billing Mechanism:
The sale price charged from homebuyers remained unaffected by ITC transitions, and no additional burden was imposed. - Findings:
Based on the data and reconciliation of tax credits, it was concluded that no profiteering had occurred in the instant case.
Legal Framework Involved
Section 171 – CGST Act, 2017
“Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.”
CGST Rules, 2017 – Rule 122 to 137
These rules govern the constitution of the NAA, the role of DGAP, investigation process, and enforcement of anti-profiteering orders.
Reversal of ITC – Rule 42 & Rule 43:
The reversal of common credit in proportion to exempt supplies or non-taxable income, which forms the crux in many real estate-related cases, was meticulously followed by Ireo Waterfront.
Industry Implications
This case is a landmark for real estate developers and acts as a precedent in scenarios where:
- ITC is reversed in entirety.
- There is no commensurate change in pricing post-GST.
- Buyers allege profiteering merely due to the presence of ITC in books.
Key Learnings:
- Documentation is Critical: The reversal entries and reconciliation of ITC played a crucial role in absolving the entity.
- Pricing Policy Alignment: Developers must maintain consistency in pricing and clearly communicate tax transitions.
- Customer Communication: Misunderstanding around GST benefits often fuels complaints. Transparency with buyers helps pre-empt such issues.
- Compliance with Rules 42/43: The meticulous reversal of common credit helped the company build a strong defence.
Judicial Precedents
The NAA, in past rulings (e.g., Abbott Healthcare Pvt. Ltd., Patanjali Ayurved Ltd.), has clarified that mere availability of ITC does not amount to profiteering unless there is retention of such benefit without passing it to the customer.
Similarly, in this case, non-utilization and reversal of ITC was sufficient to negate profiteering.
Recent Developments & Sunset Clause
With the constitution of the Goods and Services Tax Appellate Tribunal (GSTAT), and sunset of NAA’s tenure in December 2022, all pending cases are now being transferred to the Competition Commission of India (CCI).
However, legacy orders such as that of Ireo Waterfront will continue to act as guiding beacons in anti-profiteering jurisprudence.
Conclusion
The order in the case of Ireo Waterfront Pvt. Ltd. is a classic example of compliance-oriented tax governance under the GST regime. It showcases how businesses can defend their position under Section 171, provided they:
- Maintain clear records,
- Follow correct tax treatment,
- Do not inflate post-GST prices unjustifiably.
As India moves towards a maturing GST regime, with greater digital transparency and audit trails, such rulings will help balance consumer interests and safeguard businesses from frivolous complaints.
Reference:
Stox N Tax 
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