Real estate developer ordered to refund Rs. 2.27 crore for not passing GST benefits to 500 homebuyers

NAPA determined that a real estate developer profiteered Rs. 2,26,76,700 during July 2017 to December 2018 by failing to pass GST input tax credit benefits to 500 homebuyers who booked units before July 2017. The developer had properly passed benefits to 189 buyers who booked after July 2017. NAPA ordered refund of the profiteered amount with 18% interest from profiteering date until payment, and directed future price reductions commensurate with ITC benefits. No penalty was imposed as the relevant provision was not in force during the investigation period.

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Issues Involved:
1. Whether the Respondent's claim of passing on Rs. 9,45,78,855/- benefit of GST ITC to homebuyers/customers by way of reduction in GST rate was correct.
2. Whether the Respondent's claim of charging only 4.5% GST for pre-GST bookings and bearing the remaining 7.5% GST himself was correct.
3. Whether the Respondent had passed on the benefit of ITC of GST of Rs. 2,94,078/- to the Applicant No.1.
4. Whether the Respondent had given an amount of Rs. 3,41,963/- as a discount in addition to the reduction in GST rate of 7.5% to the Applicant No.1.
5. Whether the amounts claimed to have been passed on by the Respondent are in line with the provisions of Section 171 of the CGST Act.
6. The exact amount of profiteering to be passed on by the Respondent to every homebuyer/customer.

Issue-Wise Detailed Analysis:

1. Passing on Rs. 9,45,78,855/- benefit of GST ITC:
The DGAP verified the Respondent's claim that he had passed on the ITC benefit of Rs. 9,71,44,586/- through demand notes and found it correct. The Respondent passed on Rs. 2,26,26,126/- to pre-GST buyers and Rs. 7,45,18,460/- to post-GST buyers by not collecting GST from them. This was confirmed from the homebuyers' list and demand notes.

2. Charging only 4.5% GST for pre-GST bookings:
The Respondent passed on ITC benefit of Rs. 2,26,26,126/- to 478 pre-GST buyers. However, 22 buyers did not receive any benefit, and 29 buyers had no consideration received post-GST. The claim that 7.5% GST benefit was passed on to all pre-GST buyers was not fully correct. For post-GST buyers, the Respondent's claim of giving 100% GST reduction was verified and found correct.

3. Passing on Rs. 2,94,078/- ITC benefit to Applicant No.1:
The Respondent claimed to have passed on Rs. 3,44,130/- to Applicant No.1, which was verified from the allotment letter and demand note. The Applicant confirmed via email that the Respondent bore the entire GST, including ITC benefit, making the claim of Rs. 2,94,078/- incorrect.

4. Discount of Rs. 3,41,963/- to Applicant No.1:
The Respondent did not give any additional discount of Rs. 3,41,963/-. Instead, the Respondent provided GST ITC benefit of Rs. 3,44,130/- by not collecting GST from the Applicant.

5. Compliance with Section 171 of the CGST Act:
The DGAP verified that the benefit of ITC claimed to be passed on by the Respondent was correct and in line with the provisions of Section 171 of the CGST Act, 2017.

6. Exact amount of profiteering to be passed on:
The Respondent needed to pass on an additional Rs. 17,86,004/- to 146 buyers (124 buyers with Rs. 9,90,755/- and 22 buyers with Rs. 7,95,249/-).

Additional Observations:

Violation of Section 171 of the CGST Act:
The Respondent violated Section 171 by not passing on the additional ITC benefit of 6.37% of the turnover to 146 recipients, resulting in profiteering of Rs. 2,26,76,700/-. The Respondent was ordered to refund this amount with 18% interest from the date of profiteering till payment.

Compliance and Penalty:
The Respondent must reduce prices commensurate with the ITC benefit and pay interest on the profiteered amount. The jurisdictional CGST/SGST Commissioner is directed to ensure compliance and report back within four months. The penalty under Section 171(3A) could not be imposed as it was not in force during the investigation period.

Supreme Court Orders on Limitation:
The Supreme Court extended the limitation period due to the Covid-19 pandemic, making the order within the prescribed limitation.

Final Order:
The Respondent must refund the profiteered amount of Rs. 2,26,76,700/- along with 18% interest within three months. The jurisdictional CGST/SGST Commissioner must ensure compliance and publish an advertisement for public awareness.

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