Construction service provider cleared of profiteering charges under Section 171 as post-GST housing project had no pre-GST comparison period.

NAPA dismissed applications alleging profiteering against a construction service provider under Section 171 of CGST Act. The Authority found that the housing project commenced entirely in the post-GST era (after 01.07.2017), with allotment, agreements, and construction activities occurring after GST implementation. Since there was no pre-GST period for comparison, the respondent received no additional input tax credit benefit that required passing on to buyers through reduced prices. The Authority concluded no contravention occurred as there was no basis to compare ITC availability before and after GST implementation, making price recalibration unnecessary.

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Issues Involved:
1. Whether there are benefits of additional Input Tax Credit (ITC) available to the Respondent which are not passed on to the ApplicantsRs.
2. Whether there is any violation of the provisions of Section 171 (1) of the Central Goods and Services Tax (CGST) Act, 2017 by the RespondentRs.

Issue-wise Detailed Analysis:

Issue 1: Whether there are benefits of additional ITC available to the Respondent which are not passed on to the ApplicantsRs.

The Director General of Anti-Profiteering (DGAP) received four applications alleging that the Respondent had not passed on the benefit of ITC by way of commensurate reduction in prices for the project "The Roselia Sector-95A" in Gurugram, Haryana. The investigation covered the period from 01.07.2017 to 30.11.2020.

The Respondent argued that the provisions of Section 171 of the CGST Act, 2017, apply only in two cases: reduction in the rate of tax and the benefit of ITC by way of commensurate reduction in price. The Respondent stated that all agreements and construction activities occurred after the introduction of GST, and as such, there was no pre-GST turnover or input tax credit availability to compare with the post-GST period.

The DGAP's investigation revealed that all events related to the project, including allotment of units, agreements, booking, and construction activities, took place in the post-GST period. There was no sale or allotment of flats in the pre-GST regime, and the project began in the post-GST era. Therefore, there was no pre-GST base price to compare with the post-GST price to determine any profiteering.

The Applicants argued that the GST rates on the supply in question were reduced to 1% without ITC from the earlier rate of 8% effective from 1st April 2019. They claimed that the Respondent had not passed the benefit of ITC to the buyers as required for ongoing projects where old rates were opted. However, the DGAP clarified that the project started in the post-GST period, and there was no pre-GST turnover or ITC available for comparison.

Issue 2: Whether there is any violation of the provisions of Section 171 (1) of the CGST Act, 2017 by the RespondentRs.

The Authority found that the Respondent had charged GST at the rates applicable during the relevant periods and had not availed the option of 1% GST without ITC. The allotment and sale of flats commenced during the post-GST period, and there was no price history from the pre-GST period to compare for determining any profiteering.

The Authority concluded that the project "The Roselia Sector-95A" started after the implementation of GST, and all relevant activities occurred in the post-GST period. Therefore, there was no additional benefit of ITC to the Respondent that needed to be passed on to the Applicants by reducing the prices of the flats.

The Authority dismissed the applications filed by the Applicants, finding no merit in their claims. The Respondent had not contravened the provisions of Section 171 (1) of the CGST Act, 2017.

Conclusion:

The Authority concluded that there was no additional benefit of ITC to the Respondent and no requirement to pass on any benefit to the Applicants by reducing the prices of the flats. The applications filed by the Applicants were dismissed, and the Respondent was found not to have violated the provisions of Section 171 (1) of the CGST Act, 2017.

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