The National Anti-Profiteering Authority (NAA) has upheld profiteering allegation against Emaar MGF Land for not passing on the benefit of the input tax credit on GST to home buyers of ‘Emerald Floors Premier’ at Gurugram and has ordered the company to pass on the benefit within three months.
The authority has also issued a show-cause notice to the company as it is liable to penalty under the CGST Act, 2017.
As per the NAA order, the real estate developer profiteered over Rs 13.35 crore, inclusive of GST at 12 per cent on the base amount of over Rs 11.92 crore from over 1,239 home buyers including the complainant.
The authority has directed the company to reduce the prices of the flats commensurate with the benefit of ITC received by the company.
“The respondent has benefitted from the additional ITC to the extent of 11.90 per cent of the turnover during the period of July 2017 and March 2019 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the respondent as he has not passed on the above benefit to his customers and thus, he has profiteered and amount of Rs 13,35,79,636 inclusive of GST at 12 per cent on the base profiteered amount of Rs 11,92,67,532,” said the order copy.
The Director-General, Anti-Profiteering (DGAP), which investigated the complaint, said that the ITC as a percentage of the total turnover which was available to the developer during the pre-GST period, April 2016 to June 2017 was 9.08 per cent and rose during the post-GST period, July 2017 to March 2019, to 20.98 per cent.
As per DGAP, this increase meant that Emaar MGF benefited from the additional ITC to the tune of 11.9 per cent.
The order also said that as the present investigation is only up to March 31, 2019, any benefit which accrues subsequently shall also be passed on to the buyers.
Further, the authority directed the developer to pass on an amount of the amount of Rs 13.35 crore and additional realised amount of Rs 1.04 lakh with an interest of 18 per cent per annum.
Rajat Mohan, Senior Partner at AMRG & Associates, was of the view that basic principles should be issued to help taxpayers in the calculation of profiteering amount.
“NAA has issued a plethora of orders in the real-estate sector and all have one thing in common, every taxpayer is confused about the calculation of profiteering. In the wider interest of the business community, tax officers must issue some basic principles to help the taxpayers in the calculation of profiteering amount,” Mohan said.