CCI directs DGAP to further investigate 8 projects of Lucknow Development Authority

Director General of Anti-Profiteering Vs Lucknow Development Authority (Competition Commission of India)

Introduction: In a significant development, the Competition Commission of India (CCI) has taken a decisive step to ensure fairness and transparency in the real estate sector. The CCI’s recent order directs the Director General of Anti-Profiteering (DGAP) to conduct an in-depth investigation into eight projects undertaken by the Lucknow Development Authority. This order follows a meticulous investigation that was initiated based on the directions of the National Anti-Profiteering Authority (NAA) under Rule 133(5) of the Central Goods and Service Tax (CGST) Rules, 2017.

Analysis: The investigation has focused on a total of 22 projects carried out by the Lucknow Development Authority. Among these, a meticulous assessment revealed that 14 projects exhibited signs of profiteering, which cumulatively amounted to a substantial figure of Rs. 25,96,79,276. This profiteering indicates that the benefits of the Goods and Services Tax (GST) regime were potentially not entirely passed on to the homebuyers by the Lucknow Development Authority.

It is worth noting that the DGAP’s report further brought to light that out of the aforementioned profiteering amount, a partial benefit of Input Tax Credit (ITC) was indeed passed on to the homebuyers of certain projects, totaling Rs. 1,01,59,021. However, a substantial amount of Rs. 24,95,20,255 still remained unaccounted for, necessitating its transfer to the rightful beneficiaries – the homebuyers.

However, it is important to mention that for the remaining eight projects under scrutiny, the Respondent (Lucknow Development Authority) unfortunately did not provide the necessary and comprehensive information required for the accurate calculation of the profiteering amount. This deficiency in data hindered the completion of the investigation for these projects.

Conclusion: The Competition Commission of India’s directive to conduct further investigation into the Lucknow Development Authority’s projects demonstrates its commitment to promoting a level playing field and safeguarding the interests of consumers in the real estate market. By delving into the intricacies of the projects and meticulously examining the transactional details, the CCI is aiming to ensure that no unfair practices have taken place in terms of profiteering. This action underscores the significance of adhering to anti-profiteering measures and ensuring the effective implementation of GST regulations to foster transparency, ethical conduct, and consumer well-being in the realm of real estate. As the investigation progresses, it will undoubtedly shed more light on the complexities of the issue and contribute to fostering a fair and accountable business environment.

FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA

1. The present Report dated 12.07.2023, has been received from the Director General of Anti-Profiteering (hereinafter referred as “DGAP”) after a detailed investigation as per the directions passed under Rule 133(5) of the Central Goods and Service Tax (CGST) Rules, 2017 (hereinafter referred as “the Rules”) vide I.O. No. 25/2022 dated 30.09.2022 by the National Anti-Profiteering Authority (hereinafter referred as “NAA”) in respect of project “Kritika & Swati Apartment” of M/s Lucknow Development Authority (hereinafter referred as “Respondent”).

2. The DGAP vide his Report dated 12.07.2023 has inter-alia submitted the following: –

i) That as per the Uttar Pradesh RERA website the Respondent had total 44 projects registered with UPRERA. Out of these 44 projects, in respect of the project “Kritika & Swati Apartment”, NAA vide I.O. No. 25/2022 dated 30.09.2022 had directed the DGAP to conduct re­investigation under Rule 133(4) of the Rules. 21 out of 44 projects had been started in the Post GST period, i.e., after 1st July 2017. Consequently, the Anti-profiteering provisions specified under Section 171 of the CGST Act, 2017 did not apply to these 21 projects and were therefore they were not taken for investigation.

ii) That remaining 22 out of 44 projects had commenced in the Pre GST period, i.e. before 1st July 2017. The Anti-profiteering provisions in respect of these 22 projects undertaken by the Respondent have been examined in accordance with the Anti-Profiteering measures under Section 171 of the CGST Act 2017. The details of these 22 projects are provided below in Table `A’:-

Table-‘A’ (Projects Commenced in pre-GST)

iii) That out of these 22 projects given in Table ‘A’ above, the DGAP has calculated profiteering to the tune of Rs. 25,96,79,276/- in respect of 14 projects of the Respondent. The details of these 14 projects and the profiteered amount calculated by the DGAP is given in Table ‘B’ below:-

Table ‘B’

As mentioned in Table ‘B’ above, the DGAP has verified that out of the total profiteered amount, benefit of Input Tax Credit (ITC) amounting to Rs. 1,01,59,0211- to the homebuyers of the projects at Sr. No. 1, 2, 3 ,4, 6 & 7 has been passed. Therefore, the Respondent is further required to pass on an additional Input Tax Credit benefit amounting to Rs. 24, 95, 20, 255/- to the home buyers in the above 14 projects.

iv) That the DGAP has further submitted that for 08 out of 22 projects as mentioned in para 2(ii) above, the Respondent did not submit the relevant data/information required for investigation. The details of these 08 projects are given in Table ‘C’ below:-

Table ‘C’

For the projects at Sr. No. 1 to 7 above, the Respondent has furnished only insufficient information e.g. Note sheet, bill of contractors etc. which were not sufficient to investigate the case and draw any conclusion. For the project at Sr. No. 8 shown in the Table above, the Respondent vide email dated 06.07.2023 has claimed that he has passed on ITC benefit to the home buyers suo moto but the Respondent failed to provide any documents showing the ITC amount availed or passed on_; demand letters, sold area and total saleable area in support of his claim, therefore, his claim could not be verified.

v) Therefore, the DGAP vide his report dated 12.07.2023 has concluded that profiteering in respect of 08 projects as mentioned in Table ‘C’ above could not be calculated as the Respondent did not submit required data/information.

vi) The Respondent has supplied construction services in the State of Uttar Pradesh only. The present investigation covered the period from 01.07.2017 to 30.09.2022.

3. The Commission has carefully considered the Report of the DGAP and the other material placed on record and finds that the DGAP has reported profiteering of Rs. 24,95,20,255/- in respect of 14 projects mentioned in Table ‘B’ above.

4. The Commission has also found that for remaining 08 out of 22 projects, as mentioned in Table ‘C’ above, the Respondent has not provided sufficient information/ data required for calculation of profiteered amount to be passed on to the homebuyers of those 08 projects and therefore investigation could not be completed in terms of Section 171 of the CGST Act, 2017 and the Rules made thereunder, during the period from July 2017 to September 2022. The DGAP may gather the relevant information by exhausting all the available resources including getting relevant information from the concerned Jurisdictional Commissioner as prescribed under the CGST Act, 2017 and Rule 132 of the CGST Rules, 2017.

5. In view of the above, fresh DGAP report is required in respect of 08 projects. Accordingly, DGAP is directed to further investigate these 08 projects under Rule 133(5) of the Rules and submit his report accordingly. The details of these 08 projects are given in Table `D’ below:-

Table ‘D’

6.A copy of this order be supplied to all the parties free of cost and file be consigned after completion.