The Haryana Real Estate Regulatory Authority (Authority), with Sanjeev Kumar Arora (Member) presiding, has mandated M/S Chirag Buildtec Pvt. Ltd., the builder, to compensate the homebuyer for delayed possession and ensure the passing on of tax reduction benefits.

The builder persisted in levying an 8% GST rate on the homebuyer, despite the Ministry of Finance’s Notification No. 03/2019 CT (Rate) dated March 29, 2019, which reduced the GST rate on Affordable Housing Projects to 1%

Background

The homebuyer (Complainant) reserved a unit in the ROF Ananda project, an Affordable Group Housing Colony located in Sector-95, Gurgaon, on June 2, 2019, and made an initial payment of Rs. 1,12,334. The Builder-Buyer Agreement (BBA) was subsequently formalized on July 19, 2019.

As per the BBA, the total sale consideration for the unit was Rs. 22,46,680. The specific unit allocated to the homebuyer is identified as C205 in Tower-C, situated on the 2nd floor, encompassing a carpet area of 549.17 sq. ft. with an additional balcony area of 100 sq. ft.

According to the BBA, the builder was required to deliver possession of the flat within four years from the approval date of the building plans or environmental clearance, whichever occurred later.

The homebuyer argued that despite having significant resources and a legal team, the builder company failed to acknowledge the impact of the Ministry of Finance’s Notification No. 03/2019 CT (Rate), issued on March 29, 2019, which reduced GST on Affordable Housing to 1%.

Instead, despite the homebuyer booking the flat after the notification, the builder company continued to levy an 8% GST charge. When the homebuyer raised this issue, the builder company ignored their concerns.

Furthermore, the homebuyer asserted that despite their repeated follow-ups, the builder never provided an update on the status of the flat or offered possession. During a site visit by the homebuyer, security guards denied their request to inspect the construction progress and instead directed them to view another flat that did not meet their requirements, citing company policy prohibiting site visits.

Feeling aggrieved, the homebuyer filed a complaint with the authority seeking physical possession of the flat without any illegal conditions and interest for the delayed possession.

Observations and Directions by the Authority

The authority determined that the offer of possession made by the builder on February 22, 2022, was improper. This was due to the courier sent to the homebuyer not reaching its destination because of an incomplete address and the absence of a contact number on the envelope.

Furthermore, the authority noted that a valid offer of possession must fulfill three criteria: it should be made after obtaining an occupation certificate, the unit must be in a habitable condition, and the possession should not be accompanied by unreasonable additional demands. Therefore, the authority concluded that the builder’s offer of possession was invalid as it included unreasonable additional demands.

The authority directed the builder to compensate the homebuyer with interest for each month of delay from the due date of possession (April 9, 2022) until the actual possession of the flat is provided, at an annual rate of 10.95%.

Regarding the GST issue, the authority instructed the builder’s company to refund the GST amount charged at 8% to the homebuyer, as per the Ministry of Finance’s notification dated March 29, 2019.

The authority upheld that under Section 171 of the Central Goods and Services Tax Act, 2017, and the Haryana Goods and Services Tax Act, 2017, any tax reduction or benefits of input tax credit must be passed on to customers through a corresponding reduction in prices.

Posted and reproduced in Public Interest by

Adv. Sulaiman Bhimani Legal Consultant

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