The authority, under section 171 of the Central GST Act 2017, has directed Larsen & Toubro Parel Project LLP and Omkar Realtors Developers Private Limited to refund ₹30.76 crore with interest to 850 investors in Parel’s Crescent Bay project. It has also asked the director general of anti-profiteering (DGAP) to investigate profiteering in other projects executed by the two developers.

The judgement dated July 29, 2022, was recently flagged by consumer rights activist and Mumbai Grahak Panchayat chairperson Shirish Deshpande.

The complainant, Bharat Kashyap, had purchased an apartment in the Crescent Bay project for ₹6.85 crore which included GST. He had paid service tax from 2014 till 2019, and from July 2017 to September 2019, he had deposited ₹36.22 lakh towards GST with L&T. The developer, however, reversed the ITC benefit worth ₹1.29 lakh in the form of a credit note to him.

Alleging profiteering, Kashyap in October 2019 approached the state-level GST standing committee which asked the director general of anti-profiteering (DGAP) to investigate the matter and submit a report.

Holding that the two developers had not passed on the full ITC benefit to 850 buyers, including Kashyap, a three-member bench led by Amand Shah, technical member and chairman, NAA, directed L&T to refund the amount it had profiteered during the 2017-2019 period with 18% interest per annum within three months. It also directed Omkar Realtors to pass on the benefit of ITC at 10.51% of the turnover, calculated to ₹1.23 crore, to 30 out of 62 flat buyers it had received consideration from.

It is established from the perusal of the facts that respondent no 1 (L&T) has realised an additional amount of ₹7.94 lakh from applicant no. 1 (Kashyap), ₹29.45 crore from 850 home buyers, other than applicant no. 1, and ₹1.23 crore from respondent no. 2 (Omkar) between July 1, 2017 and September 30, 2019,” the authority said in its 91-page order.

The NAA also ordered that the developers reduce the prices to be realised from the buyers commensurate with the ITC benefit due to them. It also directed the developers to publish ads in local newspapers to enable home buyers to be aware of the judgment.

“The authority has a reason to believe that the respondents have been found to have contravened the provisions of section 171 of the CGST Act 2017 in respect of the project, Crescent Bay, and hence, there is every possibility that similar contravention may have taken place with his other projects,” it said.

Earlier, the NAA had heard arguments from both builders, who have a joint development agreement for six towers of the Crescent Bay project. Their lawyers contended that section 171 of the Act and the rules pertaining to anti-profiteering were unconstitutional and violative of Articles 14 and 19 (1) (g) of the constitution.

They also argued that the proceedings were time-barred as the authority should have passed its order within six months after receiving the DGAP report in 2020. They also said the constitution of the authority was improper as there was no judicial member on the three-member adjudicating panel and that the authority’s role was limited to determining the profiteered amount.

Rejecting the contentions, the NAA said, “The mandate of section 171 is limited to the extent of protecting the interest of consumers by ensuring that both the benefits of tax reduction and ITC, which are the sacrifices of precious tax revenue made from the kitty of the central and the state governments, are passed on to the end consumers who bear the burden of the tax. The intent of this provision is the welfare of the end consumers who are unorganised and vulnerable and it is the bounden duty of the government to ensure that the benefit of the tax or the benefit of ITC is passed on to the end consumers.”

However, it is unclear if the developers have implemented the NAA directive or preferred an appeal before the Bombay high court. When contacted, a spokesperson of L & T Realty spokesperson said, “The matter is presently sub-judice and no further comments.”

However, it is unclear if the developers have followed the NAA directive or challenged it before the Bombay high court.

When contacted, a L&T Realty spokesperson said, “The matter is sub-judice.”

As per section 171 of the CGST Act, the suppliers of goods and services should pass on the benefit of tax reduction or the benefit of ITC to the recipients by way of commensurate reduction in prices. The willful action of not passing on the above benefit is known as profiteering. Initially, the GST rates for real estate were in the range of 12%-18% but these came down after April 2019.