New Delhi: Homebuyers have a reason to cheer with the national anti-profiteering authority (NAA) directing Pyramid Infratech to pass on the benefits of input tax credit under the goods and services tax (GST) to its customers.
More than 100 home owners, who had bought residential units under the Haryana affordable housing policy in 2013, had approached the authority alleging that Pyramid Infratech had not passed on the benefits of the lower tax rate on construction services to them. The ruling is expected to encourage more homebuyers to lodge complaints against builders who refuse to pass on the benefits.
In an order dated 18 September, the authority said that the builder must also pay 18% interest, while dismissing the builder’s argument of escalating prices of inputs. It also directed the Haryana tax authorities to ensure implementation of the judgement.
“While the news is good for homebuyers, the moot point is the constitutional validity of Section 171 per se. The output tax rate and the input credits are relevant factors, but not the only factors to determine profitability. Lastly, absence of procedural framework raises the question of correctly computing profiteering," said Abhishek A. Rastogi, partner, Khaitan and Co. Section 171 deals with anti-profiteering provisions that seek to ensure that companies pass on the benefits of lower GST rates to customers.
“This is the first order of NAA against the real estate sector and, that too, an adverse one," said Pratik Jain, leader, indirect tax practice at PWC India. “While the overall effective tax rate for the sector may not really have reduced under GST, benefit on account of additional input tax credit available needs to be passed on by reducing the base price."