Buzz Update Obtaining a Certificate of Completion of a Realty Project after GST Implementation to counter Profitability TOU

Buzz Update Obtaining a Certificate of Completion of a Realty Project after GST Implementation to counter Profitability

 TOU

Obtaining a Certificate of Completion of a Realty Project after GST Implementation to counter Profitability

The National Anti-Profiteering Authority (NAA) has stated that there will be no lucrative charges for obtaining a completion certificate after the launch of the real estate project and the introduction of GST. This is the first verdict after a gap of over a year due to lack of quorum.

Resolving an application filed against Lodha Developers (Defendant) of Mumbai, the NAA observed that the Letter of Intent of Development, the initial certification of the project, the project commencement and the receipt of payment were made in the post-GST regime. The pre-GST rate or ITC (input tax credit) structure is comparable to the post-GST tax rate and ITC.

“On this basis, it appears that the respondents (Lodha developers) did not benefit from the additional ITC or that there was no reduction in the tax rate in the post-GST period and therefore this would not be considered a lucrative case,” the NAA said in an April 8 order.

Furthermore, the alleged developer clarified that the allegation that he did not take advantage of ITC in this case was not consistent.

ITC benefits

Darshan Joshi, from Mumbai, filed an application alleging that the respondents had resorted to profiteering in connection with the supply of construction services for a flat booked on a project in Parel. He also alleged that the developer did not take advantage of ITC through an appropriate reduction in the flat price. The Maharashtra State Screening Committee first considered the application on anti-profiteering, which was initially considered to be a lucrative case. The matter was referred to the Standing Committee on Anti-Profiteering, which referred it to the Director General of Anti-Profiteering (DGAP).

It was found after the DGAP inquiry that booking and payment receipts were made after the introduction of GST. Therefore, there is no ITC structure comparable to the pre-GST tax rate or the post-GST tax rate and ITC. Accordingly, the DGAP concluded that the regulations, which were primarily anti-profit, were not applicable in the present context. There is also no change in the final report. Subsequently, the Maharashtra State Screening Committee, commenting on the DGAP report, stated that the allegation of the applicant was not true. The NAA followed the DGAP report.

The NAA falls under the Ministry of Finance and is established under Section 171 of the CGST Act. It came into force on December 1, 2017. In view of the abrupt changes in tax levels due to the introduction of GST it was intended to be a transitional arrangement with a specific time frame, followed by a periodic rationalization. The law empowers the NAA to determine whether the input tax credit (ITC) rate deduction is passed on to consumers by reducing prices. In case of non-compliance, the Authority may ask for a reduction in prices, impose a penalty and, in extreme cases, cancel the registration. Its extended term ends on November 30 this year.

Published

April 15, 2022

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