The National Anti-Profiteering Authority ( NAA ) in the matter of Sh Sandeep Kumar v M/s Nani Resorts held the respondents guilty of profiteering and hence a refund of the profiteered amount.
The profiteering has been alleged in respect of the purchase of a flat in Nani Resorts’ Project wherein the benefit of input tax credit had not been passed by way of commensurate reduction in price at the time of introduction of GST.
The respondent submitted that since the Authority had not prescribed any procedure or methodology for determination of reduction n the rate of tax on the supply of goods or services or the benefit of ITC has been passed on or not by the registered person to the recipients as required under Rule 126 of the CGST Rules, 2017, the investigation agency has followed approach of comparing average ratio of ITC with turnover, which is not feasible or appropriate in case of real estate business and which is also against the basic principles of accounting i.e. the matching concept, wherein the accrual of ITC may not necessarily match with sales/output of current accounting period. Hence, the said procedure adopted is bad in law. The respondent further submitted that the increase in prices after the introduction of GST as a result of natural inflation.
The DGAP on being directed by the Authority to investigate reported that the Authority has reasons to believe that there has been profiteering. In furtherance to the said inquiry, the Authority has held that the Respondent has realized more price from the buyers of flats and hence is liable for imposition of penalty under Section 171(3A) of the CGST Act.
While answering the respondent’s contention, the Authority held that the profiteering and the extent thereof is determined on cases to case basis, by adopting the most appropriate and accurate method based on the facts and circumstances of each case as well as nature of the goods and services supplied. Also, that the Authority’s analysis of profiteering is based only on the changes after the introduction of GST and not costing.To Read the full text of the Order CLICK HERE