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ANTI-PROFITEERING ON SALE OF FLATS ASTER INFRAHOME CASE

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ANTI-PROFITEERING ON SALE OF FLATS ASTER INFRAHOME CASE
By: Dr. Sanjiv Agarwal
October 24, 2020
All Articles by: Dr. Sanjiv Agarwal       View Profile
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In the instant case, a total of twelve complainants filed complaints against the supplier of flats alleging profiteering by supplier in respect of purchase of flats in its projects at Gurgaon. It was alleged that the supplier had not passed on the benefit of Input Tax Credit (ITC) to them by way of commensurate reduction in the price of the flats. The complaint was examined by the Standing Committee on Anti-profiteering and further investigated by DGAP for the period 01.07.2017 to 31.08.2018.

The supplier contended that it was under regular/normal scheme with regard to Value Added Tax (VAT) in Haryana and as such, it had availed VAT credit in the pre-GST period on the purchases made during that period. As the service of construction of affordable housing, provided by the Respondent was exempted from Service Tax, vide Notification No. 25/2012-ST dated 20.06.2012, as amended by Notification No. 9/2016-ST dated 01.03.2016, it was exempted from any Service Tax liability on its receipts in the pre-GST era (01.03.2016 onwards) and was also not eligible to avail any CENVAT credit. As Service Tax not leviable on the projects related to Affordable Housing Policy, 2013, it did not charge any Service Tax from his clients w.e.f. 01.03.2016. Since credit of Central Excise Duty was not allowed to the developers/builders in the pre-GST regime, the Central Excise Duty was cost to the Respondent and as per the provisions of Section 171 of the Central Goods and Services Tax Act, 2017, the Respondent was ready to pass on the benefit of additional ITC of GST to its customers.

The DGAP noted that the ITC available to the Respondent and the amount received by him from the Applicants and Other recipients post implementation of GST, has to be taken into account to determine whether the benefit of ITC has been passed on by the Respondent to the recipients. Further, the ITC pertaining to the unsold units was outside the scope of investigation and the Respondent was required to recalibrate the base price of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to them post-GST.

The ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period from April, 2016 to June, 2017 was 0.49% and during the post-GST period from July, 2017 to August, 2018, it was 7.73% which clearly confirmed that post-GST, the Respondent has benefited from the additional ITC to the tune of 7.24% [7.73% (-) 0.49%] of the turnover. He has also observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement on value) on construction service, vide Notification No. 11/2017-CentraI Tax (Rate) dated 28.06.2017. The effective GST rate on construction service in respect of affordable and low-cost housing was further reduced from 12% to 8%, vide Notification No. 1/2018-CentraI Tax (Rate) dated 25.01.2018.

The DGAP concluded that the Respondent has not passed on the benefit of addition & ITC to his flat buyers including the Applicants and has violated the provisions of Section 171 of the CGST Act, 2017 by profiteering an amount of ₹ 5,30,34,074 which was required to be passed on to them.

The NAA observed that the additional ITC of 7.24% of the turnover, should have resulted in commensurate reduction in the base price as well as the cum-tax-price to be charged by the Respondent. Accordingly, as per the provisions of Section 171 of the Central goods and Services Tax Act, 2017, the benefit of the additional ITC which has accrued to the Respondent in the post-GST period is required to be passed on to the above Applicants as well as the other home buyers. Based on the amount collected by the Respondent from the above Applicants and the other home buyers during the period from 01.07.2017 to 24.01.2018, the amount of benefit of ITC which is required to be passed on by the Respondents to the recipients or in other words, the profiteered amount comes to ₹ 2,68,17,079 which includes 12% GST on the base profiteered amount of ₹ 2,3943,820. Further, the amount of benefit of ITC which needs to be passed on by the Respondent to the recipients or the profiteered amount during the period from 25.01.2018 to 31.08.2018, comes to ₹ 2,62,16,996 which includes 8% GST on the base profiteered amount of  ₹ 2,42.74,996. Accordingly, the total profiteered amount during the period from 01.07.2017 to 31.08.2018 comes to ₹ 5,30,34,074 which includes GST @12% or 8% on the base profiteered amount of ₹ 4,82,18,816 which is required to be passed on as per the home buyer and unit no. wise break-up of the amount which has been given by the DGAP in Annexure-25. Since the above computation has been made by the DGAP on the basis of the Returns filed by the Respondent as well as the information supplied by him which has been duly verified by the DGAP hence the above computation of the profiteered amount is taken to be correct. Accordingly, the Authority determined the profiteered amount as ₹ 5.30,34,074 which includes GST @12% or 8% on the base profiteered amount of 4,82,18,816 for the period w.e.f. 01.07.2017 to 31.06.2018 as per the provisions of Rule 133 (1) of the CGST Rules, 2017.

Thus, the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondents as he has profiteered an amount of ₹ 5,30,34,074 which includes both the profiteered amount @ 7.24% of the base price and the GST on the said profiteered amount from other recipients as well who are riot Applicants in the present proceedings. Accordingly, the above amount shall be paid to the Applicants and the other eligible house buyers by the Respondents along with interest @18% from the date from which these amounts were realised from them till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017 within a period of 3 months from the date of issue of this Order, failing which the same shall be recovered by the concerned Commissioner CGST / SGST and paid to the eligible house buyers.

The supplier was also held liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017.

Further, Authority as per Rule 136 of the CGST Rules 2017 directed the Commissioners of CGST/SGST, Haryana to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by the Authority is passed on to all the eligible buyers. [Vide NAA Order dated 19.11.2019 in MS. SANTOSH KUMARI AND OTHERS, DIRECTOR GENERAL OF ANTI-PROFITEERING, CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS, VERSUS M/S. ASTER INFRAHOME PVT. LTD, 2019 (11) TMI 1082 - NATIONAL ANTI-PROFITEERING AUTHORITY ].

Before High Court

In writ petition, petitioner had challenged vires of Rules 126 and 133(3) (b) of CGST Rules, 2017 and also Section 171 of CGST Act, 2017. However, these challenges were dismissed as withdrawn after preliminary arguments and notice has been confined only to challenge of merits of impugned order.

The petitioner vide order dated 26.02.2020 was directed to deposit 50% of the principal profiteered amount in two equally instalments to be kept in interest bearing fixed deposits. No further updates. [In ASTER INFRAHOME PVT LTD. VERSUS UNION OF INDIA & ORS. - 2020 (3) TMI 353 - DELHI HIGH COURT].

 

By: Dr. Sanjiv Agarwal - October 24, 2020

 

 

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