The National Anti-profiteering Authority (NAA) has recently confirmed GST anti-profiteering charges against a Haryana based real estate firm for profiteering over 1.5 crores as it failed to reduce the prices of houses commensurate with the benefit of the input tax credit (ITC) accruing to the developer.
Earlier also, the NAA passed an order against a real estate company where the authority had held another Haryana-based developer guilty of profiteering Rs. 8.3 crore. However, The Delhi High Court stayed the order in November admitting a petition challenging the grounds of the constitutional validity of the mechanism for determining the quantum of profiteering.
With this, more realty firms may face NAA action after the GST Council last month cut the GST rates for regular under-construction houses to 5% from 12% and to 1% from 8% for affordable housing projects. The rate cuts are accompanied with a denial of ITC, which will now become a cost to developers. If a company is to retain the earlier profit margin, it would have to raise base prices leading to possible complaints of profiteering.
The authority said that the builder had already started disbursing the profiteered amount as calculated by its investigating arm, directorate general of anti-profiteering (DGAP).
The order said that it is evident that the respondent- Company has denied the benefit of input tax credit to the buyers of the flats being constructed by him in contravention of anti-profiteering provision under GST Act.
The firm has realised more price from the buyers than it was entitled to collect and has also compelled them to pay higher GST, the order said.
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