National Anti-Profiteering Authority (NAA) has ordered real estate develop Emaar MGF to lower flat prices commensurate to additional Input Tax Credit (ITC) received post Goods & Services Tax (GST).

The matter involves complaint from a flat buyer of real estate developers’ scheme ‘Emerald Floors Premier’ at Gurugram (Haryana). The allegation was that the company was availing ITC at the higher rates of GST, which had resulted in benefit of additional ITC for the developer and was also charging GST from the buyer at 12 per cent. This complaint was investigated by the Director General of Anti-Profiteering (DGAP).

Following investigation, it found that the ITC as a percentage of the total turnover which was available to the developer during the pre-GST period was 9.08 per cent and post-GST period this rose to 20.98 per cent. This, according to DGAP meant that the developer has benefited from the additional ITC to the tune of 11.9 per cent. It was not passed to the buyer and even price of flat was not lowered, the investigation report said.

The DGAP also submitted that the amount of benefit which has not been passed on to the buyers or the profiteered amount came to ₹ 13.35 crore from 1,239 flat buyers (including the complainant). After detailed hearing, NAA upheld that the developer benefited from the additional ITC and provisions of law were contravened by the developers.

NAA is tasked to determine if the reductions in tax rates and the benefits of the input tax credit (ITC) are being passed on to consumers by way of commensurate decline in prices. In the event, the Authority confirms there is a necessity to apply anti-profiteering measures, it has the authority to order the supplier/business concerned to reduce its prices or return the undue benefit availed by it along with interest to the recipient of the goods or services. If the undue benefit cannot be passed on to the recipient, it can be ordered to be deposited in the CWF. In extreme cases, the NAA can impose a penalty on the defaulting business entity and even order cancellation of its registration under GST.

The anti-profiteering watchdog directed the developer to pass on the profiteered amount to all eligible buyers along with the interest at the annual interest rate of 18 per cent from the dates which the above amount was collected by developers and till the payment is made. Accordingly, the Authority ordered the developer to reduce the prices realised from the buyers of said project commensurate with the benefit of ITC.

It was also ordered that since the present investigation is only up to March 31, 2019, any benefit of ITC which accrues subsequently “shall also be passed on the buyers.”

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