Mahindra Lifespace denied benefit of ITC to Flat Buyers under Project ‘Avadi’: NAA imposes Penalty and 18% Interest

The National Anti-Profiteering Authority (NAA) imposed a penalty on M/s Mahindra Lifespace Pvt. Ltd., under Project ‘Avadi’ denied the benefit of Reduced Input Tax Credit (ITC) to the flat buyers.

The Applicant, S. Ganapathi Subramanian alleged profiteering by the Respondent, M/s Mahindra Lifespace Pvt. Ltd. in respect of the purchase of a flat in the Respondent’s project ‘Avadi’, located at Chennai. The Applicant had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) which had accrued to him, by a commensurate reduction in the price of the flat, after implementation of GST.

The Screening Committee held that the Respondent had availed ITC. Hence the above Applicant had rightly claimed that he was entitled to the benefit of ITC and since the Respondent had failed to pass on this benefit he had contravened the provisions of Section 171 of the CGST Act, 2017.

The DGAP reported that the Respondent has benefited from the additional ITC to the tune of 7.05% (7.06% – 0.00%) 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 fats by 7.06% due to additional benefit of ITC and by charging GST at the increased rate of 129 on the pre-GST basic prices he has contravened the provisions of Section 171 of the CGST Act 2017

The NAA observed that the M/s Mahindra Lifespace Pvt. Ltd., denied the benefit of Input Tax Credit (ITC) to buyers of flat under the Project ‘Avadi’. So the penalty under Section 171(3A) read with Rule 133 (3)(d) of the CGST Act, 2017 is imposed.

The NAA further directed the respondent to pass on an amount of Rs. 1,67,273/- to Applicant No. 1 and Rs. 2,78,25.075/- to the other 205 flat buyers respectively along with the 18% of interest per annum from the dates from which the above amount was collected by him from them till the payment is made within a period of 3 months from the date of passing of this order.