Builder profiteered by not passing additional Input Tax Credit benefit to home buyers: NAA

Categories: Advance Ruling
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Ms. Pallavi Gulati (“the applicant”) preferred an application to the Standing Committee on Anti-Profiteering alleging profiteering in respect of Anand Villas Project launched by the Respondent. The applicant booked a flat in pre-GST regime. Before coming into force of GST, the builder was entitled to avail CENVAT credit of service tax paid on input services, credit of VAT paid on purchases of the inputs and credit of VAT charged by the civil contractor on sub-contracts but the CENVAT credit of excise duty paid on inputs was not available. Input Tax Credit (“ITC”) as a percentage of the total turnover that was available to the builder during the pre-GST period was 6.91% and during the post-GST period it was 13.70% and therefore, it was clear that post-GST, the builder had benefitted from additional ITC to the extent of 6.79% (13.70% – 6.91%) of the total turnover.

Issue of profiteering was examined by comparing applicable tax and the ITC available for the pre-GST period when Service Tax @ 4.5% and VAT @ 1% was payable (total tax rate of 5.50%) with the post-GST period when the prevalent GST rate was 12% (GST @18% along with 1/3rd abatement on value) on construction service imposed vide Notification No. 11/2017-Central Tax (Rate) dated June 28, 2017.

Issue Involved:

Whether the benefit of the additional input tax credit was passed on to the Applicant?


The National Anti-Profiteering Authority vide Case No. 30/2019 dated May 08, 2019 held that additional benefit of 1.79% of the taxable turnover which has accrued to the builder was required to be passed on to the Applicant and other recipients. Therefore, provisions of section 171 of the CGST Act, 2017 has been violated by the builder as the additional benefit of ITC @1.79% of the base price received by the builder during the relevant period had not been passed on to the applicant. Further, builder has realized more price from the buyers than what entitled to collect and has also compelled them to pay more GST on the additional realisation than what they were required to pay by issuing incorrect tax invoices and hence he has committed an offence under section 122 (1) (i) of the CGST Act, 2017. Therefore, show cause notice was issued to the builder imposing penalty.

Citation: [2019] 105 250 (NAA)