In a ruling that will have far consequences for real estate developers, the National Anti-Profiteering Agency (NAA) has held that excuses like some uncertain challenges associated with GST, cannot be used to give lower tax rate benefits to the home buyers. In short, if a developer is benefited with lower GST in terms of tax rate that he needs to pass it t customer as well.
The history case that can be traced when GST was not applied and a buyer purchased a flat in “East Crest, Bengaluru” launched by Salarpuria Real Estate Pvt.Ltd. The matter came before the National Anti-Profiteering Agency (NAA) was basis, the report furnished by the director General of Anti-Profiteering (DGAP) who was also the co-Applicant in the matter. Highlights to check from DGAP reports;
- The developer had accepted the fact that he has profiteered post GST, however due to non-availability of the calculations, the benefit could not be passed on;
- The ITC pertaining to the unsold units was outside the scope of investigation and hence, the respondent is required to recalibrate the selling price as such;
- The argument that the ITC details were not available is not acceptable because the entire amount was available to the respondent;
- Profiteering, if any, has to be established at a given point of time in terms of Rule 129(6) of the CGST Rules, 2017;
- The report had determined a profiteering of 1.45% on the transaction value;
- The benefit accrued was calculated on the 51 units sold out of a total of 263 units, however, it was supposed to be passed onto the remaining 50 buyers, not being a party of the ruling.
However it was found that the builder had denied benefit of taxes to the buyer of the flats in contravention of the provisions of section 171 (1) of the CGST Act, 2017 and has thus realized more price from them that he was entitled to collect and has also compelled them to pay more GST than that they were required to pay by issuing wrong invoice taxes and this is an offence under section 122 and that was the reason they were liable for penalty.
The National Anti-Profiteering Authority in September this year directed Haryana State Tax Commissioner to monitor the order under the supervision of the DGAP by ensuring that the amount profiteered by the builder should be passed to all the home buyers. Moreover, the government needs to clarify and reiterate that buyers of real estate properties will not have to pay GST if the buyer purchases a fully constructed property after the issue of completion certificate.
“It is brought to the notice of buyers of constructed property that there is no GST on sale of complex/building and ready to move in flats where sale takes place after issue of completion certificate by the competent authority,” the finance ministry has said in a statement.
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“For such (affordable housing) projects, after offsetting ITC, the builder or developer in most cases will not be required to pay GST in cash as the builder would have enough ITC in his books of account to pay the output GST,” said ministry.
“This is the second Ruling in quick succession, earlier being in the case of Puri Construction, wherein authorities have not given any heed to submissions by Respondents on their inability to pass on credit and have held that GST has endowed benefits in terms of ITC accumulation, which needs to be passed on to buyers in all cases,” said Harpreet Singh, Partner in KPMG.