Case Law Details
Sh. Darshan Joshi Vs M/s. Lodha Developers Ltd. (National Anti-Profiteering Authority)
The brief facts of the present case are that the Applicant No. 1 had filed an application stating that the Respondent had resorted to profiteering in respect of the supply of construction services related to the purchase of Flat No. 1201 in the project ‘Lodha Primo’, Parel, Mumbai. The Applicant No. 1 had also alleged that the Respondent had not passed on the benefit of input tax credit (ITC) by way of commensurate reduction in the price of the apartment purchased by him. The above application was examined by the Maharashtra State Screening Committee on Anti-Profiteering in its meeting and it prima-face observed that it was a case of profiteering by the Respondent in terms of Section 171 of the CGST Act, 2017 and had forwarded the above application with its recommendation to the Standing Committee on Anti-profiteering for further action, as per the provisions of Rule 128 of the CGST Rules, 2017.
Held by NAA
It is clear from a plain reading of Section 171(1) mentioned above that it deals with two situations- one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the 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 (introduced from 1.7.2017) period since the Respondent has continued to pay on the ‘Construction Services’ at the effective rate of 12% with ITC. Hence, the only issue to be examined is whether there was any net benefit of ITC with the introduction of GST. On this issue, the DGAP in his Report has stated that the project “Lodha Primd’ situated at Parel Mumbai had been issued the Letter of Intent of Development on 21.11.2017 and Commencement Certificate was obtained thereafter under the regulations of Maharashtra Real Estate (Regulation and Development) Act, 2016. In terms of the provisions of the RERA Act, bookings in the project could not happen till the Commencement Certificate was obtained. Since the Commencement Certificate was obtained for the subject project post introduction of GST only and also there has not been any reduction of GST rates in the instant case, the provisions of Section 171 dealing with Anti-profiteering cannot be made applicable to the said project in the view of the fact that there was no additional ITC which had been utilized by the Respondent, which was relevant for establishing allegation of profiteering. Further, no demand has been raised by the Respondent upon Applicant No.1 in the pre-GST regime. The Letter of Intent of Development, Commencement Certificate of the project, launching of the project and receipt of the payments had taken place in the post-GST regime and hence, there was no pre-GST tax rate or ITC structure which could be compared with the post-GST tax rate and ITC. On this basis, it would emerge that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period and therefore -it does not qualify to be a case of profiteering.
In the given facts, where the project was launched after introduction of GST, booking/price of the flat has been made/finalised by the Applicant No. 1 in February 2018 and during the whole period the Respondent continued to pay the GST at same rate, and also in absence of any other legally enforceable document; the emails exchange between Applicant No. 1 and Respondent mentioned above in paragraph 8 are not relevant material in these proceedings of anti-profiteering under CGST/SGST Act, 2017.
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