Benefit of Additional ITC available after Introduction of GST on Supply of Construction Services Not Passed to the Buyer: NAA finds Supplier Guilty of Profiteering [Read Order]

ITC - GST - Construction Services - NAA - Anti-Profiteering - taxscan

The National Anti-Profiteering Authority (NAA), has found M/s Dreamhome Infrastructure Pvt. Ltd. guilty of anti-profiteering since the benefit of additional Input Tax Credit (ITC) available after the introduction of GST on ‘supply of construction services’ was not passed to the buyer.

An application was filed against the respondentM/s Dreamhome Infrastructure Pvt. Ltd. alleging that the respondent had not passed on the benefit of ITC on the supply of construction services after the implementation of GST, in respect to the construction project “Heritage max” to his recipients. The applicant Mr. Hemanth Kumar Gupta, submitted that he had purchased a flat in the respondent’s project “Heritage Max”.

The DGAP has in its report concluded that ITC as a percentage of the turnover that was available to the respondent during the pre-GST period was 3.42% and during the post-GST period, it was 8.23%. This confirmed that post-GST period, the respondent has benefited from additional ITC to the tune of 4.81% of the turnover. This benefit was required to be passed on to the recipients but it was not done and hence section 171 of CGST Act 2017 was contravened by the respondent,

The respondent contended that the credit of CENVAT paid on services was already available as credit which was already considered while determining the pricing of the unit. Thus, the GST credit on services did not result in any additional benefit, and also there was a continuous increase in the cost of raw materials procured by the respondent during market inflation.

The Authority by taking into account the CENVAT and ITC availability pre and post-GST and the details of the amount collected from home buyers during the relevant period have observed that the benefit was not passed on by the respondent to his recipients. The profiteered amount comes to Rs. 4,74,54,151/- which includes 12% GST on the base profiteered amount.

The Coram of Mr. Amand Shah, Chairman, Mr. Pramod Kumar Singh, Technical Member, and Mr. Hitesh ShahTechnical Member has held“that the respondent has denied the benefit of ITC to the buyer of his flats in contravention of the provisions of section 171 (1) during the investigating period”.

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Circular No:08/2022

Date of Judgement:   12/5/2022

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