Around 60 realty firms face GST anti-profiteering cases

The National Anti-Profiteering Authority (NAA) for goods and services tax is likely to deliver orders, starting next month, in around 60 profiteering cases filed by homebuyers against the builders from across the country. Godrej Properties, Hiranandani Realtors and Salarpuria Sattva are among the prominent builders facing the charges, officials privy to the development said.

The Director General of Anti-Profiteering (DGAP), the investigation arm of the NAA, has submitted probe reports in two-third of the cases to the quasi-judicial body which is hearing the cases. The remaining investigations are likely to be completed soon.

Several projects by builders in Mumbai, Delhi, Bangalore, Chennai and other metros are under scanner over alleged profiteering by builders not passing on the benefit of input tax credit (ITC) to customers. These include Mumbai-based Godrej Properties' Panvel project in Navi Mumbai and Surendra Hiranandani-promoted House of Hiranandani's 'Amalfi' project in Chennai.

Signature Global, Vatika, Sarvpriya and Suninfra from the National Capital Region and Salarpuria Sattva, a Bangalore-based real estate player, are also facing the profiteering charges.

The complainants have alleged that realtors didn't pass on the benefit of the ITC to the customers and instead profiteered from the credits. ITC benefits were being availed by the builders on the inputs such as cement and steel used for construction of houses.

In most cases, the benefit of an additional ITC of about 5-6% of the taxable turnover accrued to developers was not passed on to the customers.

"If a homebuyer wins the case, around 5% relief works out to be Rs 1 lakh for a homebuyer, who buys a home worth Rs 20 lakh. This kind of substantial amount makes it worthwhile for homebuyers to approach anti-profiteering authorities," an official said. More people are likely to approach anti-profiteering authorities as awareness about it increases, he added.

Most of these cases pertain to previous ITC regime prior to April 1. The ITC mechanism in GST was introduced for the sector to prevent the cascading effect of tax.

However, since most builders were reportedly not passing on the ITC of GST to customers, the Centre eventually had to withdraw it from April 1 for the real estate industry in lieu of reduction in overall GST rates for the sector to provide relief to the homebuyers.

However, the customers can approach anti-profiteering authorities at any point of time with regards to the old cases. They can also file cases for the ongoing residential projects which have started before April, provided the builder has opted to stay with the ITC regime.

"As a responsible, law abiding, and customer centric organisation, we have duly passed on all GST benefits to the customers, as required under the law. Some of our customers have raised questions to the National Ant-Profiteering Authority. We are confident of the merits of our case and will fully cooperate in providing all necessary information to satisfactorily conclude this matter," Godrej Properties said in a statement.

"The aforesaid case is pertaining to the pre-GST period and we will not be able to comment further as the matter is currently being addressed by the legislation. We are a law-abiding entity who believe in following ethical practices and maintaining transparency," said a spokesperson of Salarpuria Sattva in an e-mail statement.

Other builders were yet to respond to the e-mails sent by DNA at the time of going to press.

"A reduction in the rate of tax or any supply of goods and services or the benefit of input tax credit shall be passed on to the recipient by way of commiserate reduction in prices," as per the anti-profiteering provisions under section 171 of the Central GST Act (CGST), 2017. The law empowers NAA to determine as to whether the benefit of reduced rate of tax or the ITC has been passed on to the recipient by way of commensurate benefit to the recipient, impose penalty and cancel the registration.

Complaints are received by NAA through e-mail, post or online portal and forwarded to the standing committee or screening committee. During January- March 2019, the DGAP received 58 cases for investigation, of which 33 were related to construction services, while the remaining ones pertained to fast-moving consumer goods (FMCG) sector.

Under the multi-tier anti-profiteering mechanism, state-level screening committee examines the state-level complaint and recommends to the national-level standing committee. Standing committee also receives companies directly in respect of the complaints having pan India presence or presence in more than one state or union territory (UT). Standing committee examines and sends its recommendations to the DGAP. DGAP then completes investigation within a period of six months and furnishes the report of its findings to NAA.

Based on the report from DGAP, NAA determines all aspects relating to profiteering, passes its order regarding reduction in prices, returning the amount to the recipient, imposition of penalty and cancellation of registration.