Construction service provider failed to pass Rs. 4.44 lakh ITC benefit to homebuyers violating section 171 CGST Act

NAPA determined that respondent construction service provider failed to pass on ITC benefit of Rs. 4,44,563/- to homebuyers during July 2017 to September 2019, violating section 171 of CGST Act. Authority found respondent's ITC increased from 2.80% to 2.83% of turnover post-GST implementation, requiring 0.03% benefit to be passed to recipients. Despite respondent's claim of passing Rs. 58,65,423/- to buyers, only 23 out of 117 homebuyers confirmed receipt of benefits. NAPA ordered profiteering amount recovery within prescribed limitation period.

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Issues Involved:

1. Alleged profiteering by the Respondent by not passing on the benefit of Input Tax Credit (ITC) to the Applicant.
2. Investigation and findings by the Director General of Anti-Profiteering (DGAP).
3. Determination of whether the benefit of ITC was passed on to the recipients.
4. Calculation of the profiteered amount.
5. Compliance and verification of the benefit passed on to the home buyers.

Issue-wise Detailed Analysis:

1. Alleged Profiteering by the Respondent:

The Applicant No. 1 filed a complaint alleging that the Respondent did not pass on the benefit of ITC by way of a commensurate reduction in the prices of a flat purchased in the Respondent's project "Anmol Fortune" in Goregaon. The complaint was examined by the Maharashtra State Screening Committee on Anti-Profiteering and forwarded to the DGAP for a detailed investigation.

2. Investigation and Findings by DGAP:

The DGAP conducted an investigation and submitted a report dated 31.12.2020. The investigation covered the period from 01.07.2017 to 30.09.2019. The DGAP issued a notice to the Respondent to reply whether the benefit of ITC had been passed on to the recipients by way of a commensurate reduction in prices. The Respondent was also allowed to inspect the evidence. The DGAP found that the Respondent had claimed to have passed on Rs. 58,65,423/- as the benefit of GST ITC to 117 customers, but this claim was found to be contradictory and not fully substantiated.

3. Determination of Whether the Benefit of ITC was Passed on to the Recipients:

The DGAP's report concluded that the Respondent did not pass on the benefit of ITC to the recipients as required under Section 171 of the CGST Act, 2017. The report highlighted that the Respondent's claim of adjusting the benefit of ITC in the negotiated sale price was incorrect. The DGAP calculated that the additional ITC benefit of 0.03% of the turnover should have resulted in a commensurate reduction in the basic price and cum-tax price.

4. Calculation of the Profiteered Amount:

The DGAP calculated the profiteered amount to be Rs. 4,44,563/-, which includes 12% GST on the base profiteered amount of Rs. 3,96,931/-. This calculation was based on the comparative figures of the ratio of ITC availed/available to the turnover in the pre and post-GST periods. The DGAP also noted that the Respondent had claimed to have passed on Rs. 58,65,423/- as the benefit of ITC, but only 23 out of 117 home buyers confirmed receiving the benefit.

5. Compliance and Verification of the Benefit Passed on to the Home Buyers:

The DGAP's supplementary report dated 10.03.2021 verified the Respondent's claim of passing on the ITC benefit. The report found that only 23 home buyers confirmed receipt of the benefit, while 2 denied receiving any benefit, and the remaining did not respond. The DGAP concluded that the verification was neither definite nor conclusive. The Authority directed the concerned jurisdictional CGST/SGST Commissioner to ensure compliance with the order and to verify that the benefit of ITC is passed on to each recipient along with interest @18%.

Conclusion:

The Authority concurred with the DGAP's report and determined that the Respondent had profiteered by an amount of Rs. 4,44,563/- for the project 'Tower F' in the project "Anmol Fortune-II" during the investigation period. The Respondent was ordered to reduce the prices commensurate with the benefit of ITC received and to pass on the benefit to the recipients along with interest @18%. The concerned jurisdictional CGST/SGST Commissioner was directed to ensure compliance and submit a report within four months. The order also included provisions for public notification to inform the concerned customers about their entitlement to the ITC benefit.

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