While rejecting a plea by a real estate developers, the National Anti-profiteering Authority ( NAA ) has held that since flats are sold in installments without waiting for project completion, the buyers too cannot be made to wait endlessly to receive the benefit of input tax credit.
A complaint was lodged against the builders for not passing on the benefit of the profiteered amount to the applicant, buyers and the land owner along with interest at 18 percent.
The builders had contended that a project is market-driven and its pricing depended upon factors such as availability of hospitals, schools, public transport, pricing of competitors, demand and supply.
The developer also claimed that the demand for homes and the supplier had also played a significant role in determining the cost of the flats. It contends that the real estate business is market-driven and spread over a period of four to five years, and its pricing depends on a number of factors
“The real estate business may be spread over a period of four to five years but it is also a fact that the flats are sold in installments without waiting for completion of the project or the completion certificate. Hence the question of waiting endlessly to pass on the benefit of input tax credit to the buyer who has already paid the entire installments is not justified and the provisions of the above section also do not provide that such benefit should be passed on completion of the project. It may also be emphasized that most of the real estate projects are not completed within the stipulated period of time,” the NAA order said.
“The respondent has himself admitted that there has been benefit of ITC derived and the benefit has been passed on by him to all his customers with whom agreements had been entered into on or before June 30, 2017. The benefit has been computed at Rs 9 per sq ft and based on this calculation he has passed on the benefit of Rs 22 lakh to 221 flat buyers,” the order said.
The Authority has ordered the developer to reduce the prices to be realised from the buyers of the flats commensurate with the benefit of ITC received by him.
The GST council, in this year March, had permitted the real estate developers to shift to the 5 percent GST rate for residential units and 1 percent for affordable housing without the benefit of input tax credit from April 1.
For the ongoing projects, builders have been given the option to either continue in the 12 percent GST slab with ITC (8 percent for affordable housing), or opt for 5 percent GST rate (1 percent for affordable housing) without ITC and communicate to their respective jurisdictional officers the same by May 20.
