Delhi High Court asks builders to deposit 50% of profiteered amount

The cases involve two builders whose projects are based in Noida and Gurugram
The Delhi High Court has asked two real estate companies to deposit 50 per cent of the alleged profiteered amount in separate funds, and stayed the order of the National Anti-profiteering Authority (NAA) till the final ruling.

“The petitioner is directed to deposit 50 per cent of the principal profiteered amount. The said amount shall be deposited in two equal monthly installments,” said the court in one of the orders.

The court also ordered that the deposit be kept in interest bearing fixed deposit receipts.

The cases involve two builders whose projects are based in Noida and Gurugram. 

The NAA has imposed a penalty of Rs 5 crore each on the two builders for allegedly not passing the benefits of the Goods and Services Tax (GST) regime to the home buyers.

The projects started in pre-GST period but continued even after July 2017 when the GST was rolled out. 

The NAA calculated the profiteered amount from its calculation of input tax credit that is available in the GST system and companies’ gross turnover.

Abhishek Rastogi, counsel for the petitioners, said: “Any real estate project requires substantial investment towards the land cost at the beginning of the project and hence the ratio of the input tax credit to the total turnover may give absurd and inconsistent results.”

The NAA rules do not prescribe a specific methodology to calculate the amount of profiteering, and leave it to the authority to come out with the figure on case-to-case basis.

Rastogi, partner at Khaitan & Co, said that in the absence of declared methodology to determine the quantum of profiteering, the issue requires detailed analysis of all the factors which would lead to commensurate reduction of prices.

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