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of <h1>Respondent ordered to refund profiteered amount to home buyers after failing to pass on GST benefits</h1> <h3>Sh. Sahil Mehta, Director General Anti-Profiteering, Central Board of Indirect Taxes & Customs, Versus M/s. Salarpuria Real Estate Pvt. Ltd.,</h3> Sh. Sahil Mehta, Director General Anti-Profiteering, Central Board of Indirect Taxes & Customs, Versus M/s. Salarpuria Real Estate Pvt. Ltd., - TMI Issues Involved:1. Allegation of profiteering by not passing on the benefit of Input Tax Credit (ITC) post-GST implementation.2. Calculation and determination of the profiteered amount.3. Compliance with Section 171 of the CGST Act, 2017.4. Imposition of penalty and other legal consequences.Issue-wise Detailed Analysis:1. Allegation of Profiteering:The Applicant No. 1 alleged that the Respondent charged 12% GST on the agreement value and additional charges, without passing on the benefit of ITC by reducing the price of the flat post-GST implementation. The complaint was examined by the Standing Committee on Anti-profiteering and forwarded to the Director General of Anti-Profiteering (DGAP) for a detailed investigation.2. Calculation and Determination of the Profiteered Amount:The DGAP's investigation covered the period from 01.07.2017 to 30.06.2018. It was found that the Respondent's project 'East Crest' attracted normal GST @ 12%. The Respondent admitted that he could not ascertain the exact impact of GST immediately and had to negotiate with contractors and vendors for price reduction due to ITC. The DGAP calculated the ITC ratio based on the taxable turnover, determining that the ITC as a percentage of the total turnover was 3.06% pre-GST and 4.51% post-GST, resulting in an additional ITC benefit of 1.45%.3. Compliance with Section 171 of the CGST Act, 2017:Section 171 mandates that any reduction in tax rate or benefit of ITC must be passed on to the recipient by way of commensurate reduction in prices. The DGAP found that the Respondent had not passed on the additional ITC benefit of 1.45% to the home buyers. Consequently, the profiteered amount was calculated as Rs. 19,69,991, including GST @12% on the base profiteered amount of Rs. 17,58,921.4. Imposition of Penalty and Other Legal Consequences:The Respondent argued that the DGAP's findings were premature and that the final figures of ITC benefit could only be determined upon project completion. However, the Authority concluded that the Respondent had contravened Section 171 by not passing on the ITC benefit and ordered the Respondent to refund the profiteered amount along with interest @18% to the affected home buyers. The Authority also directed the DGAP to investigate further for the remaining flats sold post-June 2018.The Respondent's plea for not imposing a penalty was considered, but the Authority found that the Respondent had consciously violated the provisions of the CGST Act, 2017. However, the notice for penalty was found to be vague and was ordered to be withdrawn, with a fresh notice to be issued specifying the exact allegations.Conclusion:The Respondent was found to have profiteered by not passing on the ITC benefit to the home buyers, violating Section 171 of the CGST Act, 2017. The Authority ordered the Respondent to refund the profiteered amount with interest and directed further investigation for additional flats sold. The imposition of penalty was deferred pending a fresh, specific notice.
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