The National Anti-Profiteering Authority (NAA) has asked Larsen & Toubro (L&T) Parel Project LLP and Omkar Realtors Developers Pvt Ltd to refund Rs30.76 crore with interest to 850 investors in their Crescent Bay project. The home-buyers claimed that they did not receive the full benefit of input tax credit (ITC) on the goods and services tax (GST) payments made to developers, says a report from Hindustan Times.

According to the report, NAA also asked the director general of anti-profiteering (DGAP) to investigate profiteering in other projects executed by these two developers. The NAA judgement, dated 29 July 2022, was recently flagged by consumer rights activist and Mumbai Grahak Panchayat chairperson Shirish Deshpande.

Bharat Kashyap had purchased an apartment in the Crescent Bay project for Rs6.85 crore, including GST. He had paid service tax from 2014 till 2019, and from July 2017 to September 2019, he had deposited Rs36.22 lakh towards GST with L&T Parel Projects. The developer, however, issued a credit note for just Rs1.29 lakh as an ITC benefit to him.

In October 2019, Mr Kashyap approached the state-level GST standing committee alleging profiteering by the developer. The committee asked the DGAP to investigate the matter and submit a report.

The report says, a three-member bench led by Amand Shah, technical member and chairman of NAA, held L&T Parel Projects and Omkar Realtors Developers responsible for not passing on the full benefit to 850 buyers, including Mr Kashyap. "... (NAA) directed L&T Parel Projects 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 Rs1.23 crore, to 30 out of 62 flat buyers it had received consideration from."

In its 91-page order, the NAA says, "It is established from the perusal of the facts that L&T Parel Projects has realised an additional amount of Rs7.94 lakh from Mr Kashyap, Rs29.45 crore from 850 home buyers, other than Mr Kashyap and Rs1.23 crore from Omkar Realtors Developers between 1 July 2017 and 30 September 2019."

According to the newspaper, 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 advertisements 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," the report says quoting NAA.

L&T Parel Projects and Omkar Realtors Developers had signed a joint agreement to develop six towers of the Crescent Bay project in Parel, Mumbai.

During the hearing before NAA, the developers contended that proceedings were time-barred since the Authority did not pass any order for six months after receiving the report from DGAP in 2020. Further, they also argued that the constitution of NAA 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.

However, NAA rejected the contention, the newspaper report says. "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."

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. 

When contacted, a spokesperson of L&T Realty told the newspaper that, since the matter is sub-judice, the company has no further comments.