Property developers must pass GST benefits to flat purchasers or face profiteering charges under Section 171

NAPA determined that two property developers profiteered Rs. 67,18,426 and Rs. 4,59,286 respectively by not passing GST benefits to flat purchasers during July 2017 to December 2019, violating Section 171 of GST Act. First respondent had already passed benefits through credit notes. Second respondent was directed to pass remaining benefit of Rs. 3,61,621 with 18% annual interest from collection date until actual payment to homebuyers as per Rule 133(3)(b) CGST Rules 2017.

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Issues Involved:
1. Whether the benefit of Input Tax Credit (ITC) was passed on to the customers.
2. Calculation discrepancies in ITC figures.
3. Incorrect assumptions regarding ITC for different towers.
4. Reversal of credit for units with Occupancy Certificate (OC).

Issue-wise Analysis:

1. Benefit of ITC Passing:
The Respondent No. 1 was required to pass on the benefit of ITC to the customers of the project "Godrej Summit" as per the anti-profiteering provisions under Section 171 of the CGST Act, 2017. The DGAP's re-investigation revealed that the ITC as a percentage of turnover increased from 3.70% in the pre-GST period to 5.25% in the post-GST period, indicating an additional benefit of 1.55% that needed to be passed on. The Respondent No. 1 claimed to have passed on the benefit of Rs. 1,17,37,843/- through credit notes and tax invoices, which was verified by the DGAP. However, the Respondent No. 2 was found to have passed on only Rs. 97,665/- out of the required Rs. 4,59,286/-, leaving a shortfall of Rs. 3,61,621/-.

2. Calculation Discrepancies in ITC Figures:
The Respondent No. 1 claimed discrepancies between the ITC figures reported by the DGAP and those in GSTR-3B returns. The DGAP verified and rectified the difference of Rs. 2,09,28,765/- due to ITC reversal reported in March 2018, which was corrected in the Annual Return GSTR-9 for FY 2017-18.

3. Incorrect Assumptions Regarding ITC for Different Towers:
The DGAP's initial report was based on the assumption that ITC for April 2016 to June 2017 pertained to 11 towers, while ITC for July 2017 to August 2018 pertained only to Towers A and L. Upon re-investigation, the DGAP considered the revised information provided by the Respondent No. 1 and recalculated the profiteering amount accordingly.

4. Reversal of Credit for Units with OC:
The DGAP examined the reversal of credit for unsold units at the time of receipt of OC and found it to be correct. The investigation period was extended to 30.11.2019 to include the reversal of ITC post-OC receipt on 26.12.2018. The DGAP confirmed that the Respondent No. 1 had reversed ITC for unsold units and recomputed the profiteering amount.

Final Judgment:
The Authority found that the Respondent No. 1 had passed on the benefit of ITC as claimed, and Section 171 of the CGST Act, 2017, is not invoked against him. However, the Respondent No. 2 is directed to pass on the remaining benefit of Rs. 3,61,621/- along with interest. The Authority also directed the Respondents to pay interest on the additional amounts collected from each recipient from the date of collection until the actual date of passing on the benefit. Compliance with these directions is to be monitored by the Commissioners of CGST/SGST Haryana under the supervision of the DGAP.

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