Profiteering in Real Estate – Remand to Competition Commission of India (CCI) for Reassessment
Summary in Key Points:
- Issue: Whether the methodology used by the National Anti-Profiteering Authority (NAA) and Director General of Anti-Profiteering (DGAP) to determine profiteering in the real estate sector is valid.
- Facts: The parties involved referred to the case of Reckitt Benckiser India Pvt. Ltd. v. Union of India, where the High Court held that the methodology used by NAA and DGAP to calculate profiteering in the real estate sector was flawed. The High Court had remanded the matter to the CCI for reconsideration.
- Decision: Following the precedent set in Reckitt Benckiser, the High Court remanded the present cases back to the CCI for determination of profiteering in accordance with the principles laid down in that judgment.
Decision:
The High Court ruled in favor of the assessees, setting aside the impugned orders and remanding the matters back to the CCI. The court highlighted the following:
- Flawed Methodology: The existing methodology used by NAA and DGAP to calculate profiteering in the real estate sector was found to be flawed in the Reckitt Benckiser case. This methodology relied on comparing the ratio of Input Tax Credit (ITC) to turnover in the pre-GST and post-GST periods, which is not appropriate for the real estate sector due to the lack of a direct correlation between turnover and ITC.
- Remand to CCI: Following the precedent set in Reckitt Benckiser, the court remanded the present cases back to the CCI for a fresh determination of profiteering. The CCI is expected to adopt a methodology that is suitable for the real estate sector and takes into account the unique characteristics of this industry.
Important Note: This case highlights the challenges in determining profiteering in the real estate sector and the need for a specific methodology that considers the industry’s unique features. The High Court’s decision to remand the cases to the CCI emphasizes the importance of accurate and fair calculation of profiteering to ensure that the benefits of GST are passed on to consumers. This decision provides guidance to the CCI and ensures that profiteering in the real estate sector is assessed using a valid and appropriate methodology.
R/SPECIAL CIVIL APPLICATION NO. 4321 of 2023