Emaar MGF held guilty for profiteering of Rs. 13 crore upto 31st March 2019. NAA ordered Emaar MGF to refund the amount profiteered by them to all the home buyers irrespective of the fact that they have not filed any complaint against the seller.

NAA rejected the plea of Emaar MGF that only one person has filed the complaint, therefore investigation must be limited to that application only and NAA should not suo-moto assume jurisdiction with regard to other home-buyers. NAA ordered Emaar MGF to refund the amount to all buyers irrespective of the fact whether they have filed complaint or not. This is a welcome judgement passed by NAA in the interest of all home buyers of Emaar MGF Project.

The builder has been found guilty for not passing the benefit of ITC under GST to home buyers despite the fact that their ITC ratio to turnover has increased from 9.08% to 20.98% in Post-GST Regime.

Issues under investigation:

The main issues for determination were whether there was reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and in case it was so, whether the Respondent has passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act, 2017 or not.

The details of ITC availed and benefit accrued to the Emaar MGF in Pre-GST and Post -GST regime has been submitted by DGAP as below.

The DGAP has argued from above table that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 9.08% and during the post-GST period (July, 2017 to March, 2019), it was 20.98% which clearly confirmed that post-GST, the Respondent has been benefited from additional ITC to the tune of 11.90% [20.98% (-) 9.08%] of the turnover.

DGAP has further calculated the amount profirteering by Emmar MGF as below.

Held by NAA:

It is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the extent of 11.90% of the turnover during the period from July, 2017 to March, 2019 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the above benefit to his customers and thus he has profiteered an amount of Rs. 13,35,79,636/-.

Accordingly, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats of the above Project commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 31.03.2019 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on to the eligible flat buyers. 

It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his above project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence. he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.

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