Builders Should Pass the Benefit of ITC to the Buyers: NAA [Read Order]

The National Anti- Profiteering Authority ( NAA ) held that if the builders have denied the benefit of  ITC to the buyers, then liable to be punished for profiteering in contravention of provisions of Section 171 of the CGST Act, 2017.

The ruling was made by the bench comprising of members B.N Sharma, Chairman, J.C. Chauhan Technical Member, and Amand Shah, Technical Member in the case of Dharmendra Gaud vs. M/S JMK Holdings. The Applicant had purchased a flat in the Respondent's project “Grand IV A" situated at Haryana and he alleged that the Respondent had increased the price of the flat after the introduction of GST and had not passed on the benefit of the input tax credit by way of commensurate reduction in the price. The Haryana State Screening Committee on Anti-profiteering having satisfied that the Respondent had not passed on the appropriate benefit of input tax credit to the Applicant and the said application was forwarded to the DGAP for detailed investigation.

The DGAP submitted that the respondent had benefited from the additional ITC 2.51% of the total turnover which he was required to pass on to the flat buyers of this project. The respondent not submitted evidence to prove that CENVAT credit of the pre-GST period, pertaining to unsold units was not carried forward to the post-GST period. The respondent denying them a benefit for more than 4 years and use the additional ITC in his business at the same time.

The Respondent submitted that the DGAP’S report had made incorrect finding that he had benefited from additional ITC of the turnover and the above finding was based on the average Method applied by the DGAP on his own accord.

The authority held that the respondent has denied the benefit of ITC to the buyers of the flats and the shops being constructed by him in his project “Grand IV A”. The provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has profiteered an amount of which includes GST from all the flat buyers. He has committed an offense under section 171(3A) of the Act. This 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. And also as per Rule 136 of CGST Rules 2017 directs the commissioners of CGST/SGST to monitor this order for ensuring that the amount profiteered by the respondent is passed on to all the eligible buyers.

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