Some real estate developers have taken the government to court over the constitutional validity of National Antiprofiteering Authority (NAA) and claimed that the body does not have power to demand interest on penalties slapped by it. This comes after NAA slapped notices on 50 real estate developers across India for profiting from the Goods and Services Tax (GST). According to a writ petition filed in the Delhi High Court, the NAA is on a par with a tax tribunal but it doesn’t have even one judicial member as part of it. “In the absence of a judicial member, the constitution of NAA is unconstitutional and untenable,” the writ petition filed in the Delhi High Court reads.
As per the GST framework, the benefits of the rate reduction have to be passed on to customers. If a company is unable to do so, it can be levied penalties and interest on top of it for profiteering from the tax regime. The section in the GST Act dealing with antiprofiteering states: “Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient (consumer) by way of commensurate reduction in prices.” Input tax credit refers to a mechanism under the GST framework wherein the tax a company pays when it buys raw materials or other services can be passed on to the buyer when the goods or services are sold.
Many real estate developers based in Delhi, Mumbai, Chennai and Bengaluru were asked to pay penalties as they did not pass on the benefits of the input tax credit to the customers. As per the investigations by the NAA, developers are not passing on the benefits of the input tax credit to customers. The real estate developers are challenging NAA’s authority to slap interest on the penalties as well.