Claiming Credit of VAT Paid on the Inputs, But Not Discharged Any Output VAT Liability Amounts to Profiteering: NAA [Read Order]

In a recent case, the National Anti-Profiteering Authority held that the Respondent had claimed credit of VAT paid on the inputs, but he had not discharged any output VAT liability would amount to profiteering. It orders under Rule 133 (3) (a) of the CGST Rules, 2017 that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the Benefit of ITC received by him.

Applicant vide his complaint had Alleged that the Respondent was not passing on the benefit of ITC to him in spite of the fact that he was availing ITC on the purchase of the Inputs at higher rates of GST which had resulted in the benefit of Additional ITC to him and was also charging GST from him @12%. The above complaint was investigated by the DGAP and vide his Report, he has found that the ITC as a percentage of the total turnover which was available to the Respondent during the Pre GST period was 0.42% and during the post GST period, the ratio was 3.89% and therefore, the Respondent had benefited from additional ITC to the tune of 3.47% (3.89% – 0.42%) of the total turnover which he was required to pass on to the flat buyers of this project. The DGAP has also found that the Respondent has not reduced the basic prices of his flats by 3.47% due to additional benefit of ITC and by charging GST at the increased rate of 12% on the pre-GST basic price, he has contravened the provisions of Section 171 of the CGST Act, 2017. The DGAP has further Submitted that the amount of benefit of ITC which has not been passed on by the Respondent which included GST.

The major contention of the respondent that the credit of VAT paid on inputs has not been considered. Further, the objection raised to Exclude Land value from the turnover of the post-GST period and he has claimed that he had duly passed on ITC Benefit of an amount till the date of Submissions to the eligible customers.

The bench comprising of members B.N Sharma, Chairman, J.C. Chauhan Technical Member And Amand Shah, Technical Member held that DGAP vide his reports have addressed all the objections raised by the Respondent and the explanations given by the DGAP are correct and can be relied upon. The claim of the Respondent is incorrect since though the Respondent had claimed credit of VAT paid on the inputs, but he had not discharged any output VAT liability. Further, Respondent also did not pay VAT in the pre-GST period from the home-buyers. Thus, for determining the profiteering amount, neither the credit of VAT paid on the inputs nor the output VAT liability had been taken into consideration by the DGAP and thus, DGAP has rightly computed the Profiteering in this aspect. Further, observed that the objection raised by the Respondent to Exclude Land value from the turnover of post-GST period is not correct As the DGAP had compared the total turnover of the Respondent for the pre as well as post-GST periods and the value of land was also included in post-GST turnover as the Respondent had been paying GST at the effective rate of 12% on the total turnover. Therefore, the objections raised by the Respondent are not sustainable and cannot be accepted.

The Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the Benefit of ITC received by him as has been detailed above. The Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST, Tamil Nadu to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by the Authority is passed on to all the eligible buyers.