Builder not required to reduce flat prices as no pre-GST input tax credit comparison available under Section 171(1)

NAPA dismissed applications alleging builder failed to pass on input tax credit benefits to flat purchasers under Section 171(1) CGST Act, 2017. Authority held no additional ITC benefit existed as project commenced after GST implementation on 01.07.2017, making comparison with pre-GST ITC unavailable. Since no basis existed for comparing ITC before and after GST, builder not required to reduce flat prices. Applications found without merit and dismissed.

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Issues Involved:

1. Whether there are benefit of additional ITC available to the Respondent which are not passed on by him to the Applicant No. 1 and 2Rs.
2. Whether there is any violation of the provisions of Section 171 (1) of the CGST Act, 2017 by the RespondentRs.

Issue-wise Detailed Analysis:

I. Benefit of Additional ITC:

The DGAP reported that the Respondent's project "Avenue-51" was launched in the post-GST era, with no pre-GST price history to compare against. The project received Environmental Clearance on 21.07.2017, and the draw of lots for allotment of units took place on 08.08.2017, both after the GST implementation. The Respondent charged GST at the reduced rate of 8% from 25.01.2018, in compliance with Notification No. 01/2018 Central Tax (Rate) dated 25.01.2018. The DGAP concluded that since the project commenced post-GST, there was no pre-GST tax rate or input tax credit structure to compare with the post-GST period. Therefore, the provisions of Section 171 of the CGST Act, 2017, regarding profiteering, were not applicable.

II. Violation of Section 171 (1) of the CGST Act, 2017:

The DGAP's investigation revealed that the Respondent had availed ITC post-GST but had no pre-GST price history for comparison. The price of Rs. 4000/- per sq. ft. fixed by the Government was an indicative maximum price and not the actual selling price. The DGAP argued that the benefit of ITC availed post-GST could not be compared with the pre-GST period, as there was no turnover or credit in the pre-GST period. Consequently, the ratio of ITC to turnover could not be derived, making profiteering unquantifiable. The DGAP maintained that the provisions of Section 171 (1) were not contravened as the project started post-GST, and there was no additional ITC benefit to be passed on.

Conclusion:

The Authority concluded that the Respondent had not contravened the provisions of Section 171 (1) of the CGST Act, 2017. The project commenced post-GST, and there was no pre-GST price history or ITC benefit comparison available. The Respondent had complied with the reduced GST rate from 12% to 8% as per Notification No. 01/2018 Central Tax (Rate) dated 25.01.2018. Therefore, the allegations of profiteering by the Applicants were found to be incorrect, and the applications were dismissed.

Additional Observations:

The Authority noted procedural delays due to lack of quorum and extensions granted by the Hon'ble Supreme Court due to the COVID-19 pandemic. The order was issued within the extended limitation period prescribed by the Supreme Court.

Order:

The applications filed by the Applicants were dismissed, and a copy of the order was sent to the Applicants and the Respondent free of cost. The case file was consigned after completion.

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