Real estate developer ordered to refund Rs. 6.87 crore profiteered amount for not passing GST Input Tax Credit benefits to flat buyers under Section 171

NAPA ruled against a real estate developer for failing to pass on Input Tax Credit benefits to flat purchasers, violating Section 171 of GST Act. The developer profiteered Rs. 6,87,58,686 (4.25% of turnover) during July 2017-December 2019. NAPA ordered refund of the profiteered amount plus 18% interest from the date of profiteering until payment. However, penalty under Section 171(3A) could not be imposed retrospectively as the provision was enacted after the violation period ended.

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Issues Involved:
1. Violation of Section 171 of the CGST Act, 2017 by the Respondent.
2. Whether the Respondent has passed on the benefit of Input Tax Credit (ITC) to his customers.
3. Calculation and determination of the profiteered amount.
4. Compliance and enforcement of the order by the Respondent.

Issue-wise Detailed Analysis:

1. Violation of Section 171 of the CGST Act, 2017 by the Respondent:
The National Anti-Profiteering Authority (NAA) received a report from the Director-General of Anti-Profiteering (DGAP) following a detailed investigation. The investigation was initiated based on allegations that the Respondent did not pass on the benefit of ITC to the buyers of units in the "Migsun Wynn" project in Greater Noida, Uttar Pradesh, as mandated by Section 171 of the CGST Act, 2017. The DGAP's investigation covered the period from 01.07.2017 to 31.12.2019 and concluded that the Respondent had indeed benefited from additional ITC of 4.25% of the turnover but did not pass this benefit to the buyers, thus violating Section 171.

2. Whether the Respondent has passed on the benefit of ITC to his customers:
The Respondent claimed to have passed on the ITC benefit amounting to Rs. 9,77,49,000/- to his customers and provided sample acknowledgment receipts as evidence. However, the DGAP and the NAA found these claims unsubstantiated due to the lack of verifiable records and allegations from buyers that the receipts were fake and signatures forged. The NAA concluded that the Respondent's claim could not be accepted without authentic acknowledgment receipts from each customer.

3. Calculation and determination of the profiteered amount:
The DGAP calculated the ratio of ITC to turnover for both pre-GST and post-GST periods. The pre-GST ratio was 0.87%, and the post-GST ratio was 5.12%, indicating an additional ITC benefit of 4.25%. The total profiteered amount was determined to be Rs. 6,87,58,685/-, inclusive of GST at 12% or 8% as applicable. This amount was calculated based on the turnover and the additional ITC benefit that should have been passed on to the buyers. The NAA affirmed this methodology as appropriate, logical, and reasonable.

4. Compliance and enforcement of the order by the Respondent:
The NAA ordered the Respondent to refund the profiteered amount of Rs. 6,87,58,685/- along with 18% interest from the date the amount was profiteered until the date of payment. The Respondent was also directed to reduce the prices of the units commensurate with the ITC benefit received. The jurisdictional CGST/SGST Commissioner was tasked with ensuring compliance with this order and submitting a compliance report within four months. Additionally, the DGAP was directed to investigate profiteering in other projects undertaken by the Respondent under the same GSTIN.

The NAA also mandated the publication of an advertisement in local newspapers to inform homebuyers about the order and their entitlement to claim the ITC benefit. The Supreme Court's orders extending the period of limitation due to the COVID-19 pandemic were acknowledged, ensuring the order's validity within the prescribed limitation period.

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