In a big relief to the home buyers, the National Anti-Profiteering Authority (NAA) has ordered Gurugram-based Pyramid Infratech to refund over Rs 8.22 crore to 2,476 flat owners as it had failed to pass on the benefit of GST reduction to them.
The order was passed Tuesday on a complaint of profiteering filed by 109 home buyers of two affordable housing projects of Pyramid Infratech — Urban Homes, Sector 70A, Gurugram and Urban Homes, Sector-86, Gurugram.
The authority directed the company to refund or reduce Rs 8.22 crore from the buyers’ last installment along with the interest of 18 per cent per annum to be calculated from the date of the receipt of the excess amount from each buyer, within a period of 3 months.
The home buyers in their complaint had said that Pyramid Infratech had not passed on the benefit of lower tax arising out of availing of input tax credit (ITC) post roll out of the GST and hence has indulged in profiteering.
The company contended that there was an increase in the cost of raw materials and also increased burden of taxes of sub-contractors, because of which there were no benefit of GST accrued to the buyers of the flats.
After investigation, the Directorate General of Anti-Profiteering (DGAP) submitted its report to the National Anti Profiteering Authority (NAA) saying that Pyramid Infratech has profiteered Rs 8,22,80,998 from the flat owners by not passing on the GST benefit.
The GST came into effect from July 1, 2017. The effective rate on affordable housing was 12 per cent initially, and was reduced to 8 per cent from January 25, 2018. The period of investigation was July 2017-February 2018.
In its order, the NAA said it is “absolutely clear” that excess ITC was available to Pyramid Infratech and the benefit was required to be passed on to the buyers. “The Respondent (Pyramid Infratech) cannot appropriate this benefit as this is a concession given by the Government from its own tax revenue to reduce the prices being charged by the builders from the vulnerable section of society which cannot afford high value apartments.
“The Respondent is not being asked to extend this benefit out of his own account and he is only liable to pass on the benefit of ITC to which he has become entitled by virtue of the grant of ITC on the Construction Service by the Government,” the NAA order said.
Upholding that the realty firm has profiteered over Rs 8.22 crore, the NAA said Pyramid Infratech shall “not only pass on the benefit … to the 109 applicants who are before us, but to all the 2,476 buyers as they are identifiable”. The NAA has also sought explanation from the company as to why penalty should not be imposed on it for issuing incorrect invoice and collecting extra Goods and Services Tax (GST).
It has also directed the Commissioner of State Tax, Haryana, to monitor whether the amount profiteered was passed on to all the buyers and submit a report to the authority within 4 months. Commenting on the order, AMRG & Associates Partner Rajat Mohan said real estate sector was earlier advised and later cautioned by all levels of government machinery against increase in prices post GST.
“This is the first ruling by NAA against real estate sector on account of anti-profiteering, which has sent shock waves across the entire sector. Defaulting builders are looking at a colossal demand of taxes together with interest worsening their current cash flow situation,” Mohan said.