IMPLICATIONS OF ANTI-PROFITEERING IN REAL ESTATE
VIVEK KUMAR VS BHARTIYA URBAN PVT. LTD. (COMPETITION COMMISSION OF INDIA)
Section 171 of the CGST Act, 2017 and rules 123 to 137 of the CGST rules deals with the provision of anti-profiteering authority under GST law. Investigation by National Anti-Profiteering Authority (NAA) into alleged profiteering by Bhartiya Urban Pvt. Ltd. in "Nikoo Homes-I" project, Bengaluru. Allegation was Developer did not pass on Input Tax Credit (ITC) benefits to buyers after GST introduction on July 1, 2017. Complaint filed by buyer Vivek Kumar.
Section 171 of the CGST Act provides as under: –
“Any reduction in rate of tax on any supply of goods or services or_ the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices.”
It is clear from the plain reading of Section 171 (1) mentioned above that it deals with two situations,
1)Passing on the benefit of reduction in the rate of tax and
2)Passing on the benefit of the ITC.
On the issue of reduction in the tax rate, it is apparent from the DGAP’s Report that there has been no reduction in the rate of tax in the post GST period. Hence, the only issue to be examined is as to whether there was any additional benefit of ITC with the introduction of GST.
The Commission observes that, the ITC, as a percentage of the turnover, that was available to the Respondent during the pre- GST period (April-2016 to June-2017) was 9.95%, whereas, during the post-GST period (July-2017 to October, 2019), it was 9.27%. Hence, the Respondent has availed lesser ITC to the extent of 0.68% [9.95% (-) 9.27%] of the turnover as compared to the pre-GST period. This confirms that in the post-GST period, the Respondent has not been benefited from additional ITC as percentage of the turnover that was available to the Respondent during post-GST is lower than during the pre-GST.
In view of the above findings, we find that the instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. Accordingly, the proceedings initiated against the Respondent under Rule 133 (4) of the CGST Rules, 2017 are hereby dropped.
DGAP calculated ITC benefit due to buyers. Compared pre-GST and post-GST ITC, found no significant increase post-GST. Section 171 requires passing on benefits of reduced tax rates or increased ITC to consumers. Not applicable in this case due to no reduction in tax rate and no substantial ITC increase.
Case highlights complexities of anti-profiteering in real estate sector under GST. Application of anti-profiteering provisions depends on specific circumstances. Developer not found guilty of profiteering due to lack of significant ITC increase and tax rate increase. Emphasizes importance of thorough investigation and legal interpretation in anti-profiteering cases.
Disclaimer: The news articles/knowledge updates related to law, business and finance published by us are intended to provide general information and basic understanding only and are not substitute for any professional or legal advice. By accessing and using the news articles/knowledge updates on our website, you acknowledge and agree to the terms of this disclaimer. We reserve the right to modify or update this disclaimer at any time without prior notice.
