TMI Blog2018 (12) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... gally not correct to the extent that there had been increase in the rate of tax from 5.25% to 12% and then 8% and no benefit could be passed on by him to the Applicants as the Respondent had become entitled to claim ITC the benefit of which was required to be passed on by him to the Applicants as per the provisions of Section 171. It is also apparent from the returns that when compared to the pre- GST period where 86% of the tax liability was paid in cash after availing ITC, in the post GST period the entire amount of tax liability had been paid through ITC, which shows that the entire 12% GST liability was paid through ITC while 12% GST was being collected by him from the Applicants. Therefore this Authority is of the view that the ratio of the ITC to the taxable turnover calculated by the DGAP is correct and the Respondent has not placed any concrete facts or reasons on record to dispute the same. It is absolutely clear that the excess ITC was available to the Respondent the benefit of which he was required to pass on to the Applicants. The Respondent cannot appropriate this benefit as this is a concession given by the Government from it’s own tax revenue to reduce the pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TC) had not been passed on to the Applicants in respect of the construction service supplied by the Respondent. The Applicants are:- S. No. S/Sh. Email ID 1 Sukhbir Rohilla* sukhbirrohilla001@gmail.com 2 Himanshu Sethi* winiscertain@gmail.com 3 Rajender Kumar* rajender.kumar20865@gmail.com 4 Deepak Kumar* fialok.deepak@gmail.com 5 Gaurav Rohilla, Nitesh Rohilla, Surender Rohilla* sukhbirrohilla001@gmail.com 6 Razia Hamind17@gmail.com 7 Aarek Mehrotra* smarty.aarekh@gmail.com 8 Neeraj Dale* neeraj.dale@gmail.com 9 Kuldeep Maan kuldeepmaan007@gmail.com 10 Alok Tyagi* ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35 Jofin Mathew jofinmathew@gmail.com 36 Bharat Bhushan Badesra* bbbadesra@gmail.com * Applicants who have filed more than one application:- 2. The above Applicants had booked flats with the Respondent under the Haryana Affordable Housing Policy 2013 (here-in-after referred to as the Policy), notified by the State of Haryana vide Notification No. PF-27/48921 dated 19.08.2013. They had alleged that before coming in to force of the CGST Act, 2017 w.e.f. 01.07.2017, Excise Duty and Value Added Tax (VAT) were being collected from them as Service Tax was exempted, however, after the implementation of the above Act, 12% Goods Services Tax (GST) was levied on the construction service in place of Excise Duty and VAT w.e.f. 01.07.2017, which was further reduced to 8% w.e.f. 25.01.2018 but the benefit of Input Tax Credit (ITC) which was available to the Respondent and which was much more than the output tax liability of the Respondent had not been passed on to them and therefore the Applicants should not have been burdened with the entire GST of 12% or 8%. They had further al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vinod Khanduja* vinoddhiraj@gmail.com 12 Amarjeet Kumar* ca.amarjeet@gmail.com 13 B N Meena* ritesbn@gmail.com 14 Saurav Kumar Aggarwal* star_sas2010@yahoo.com 15 Udayan kishore Mishra* udayankishoremishra@gmail.com 16 Zeeshan Ali Quazi* er.zeeshan99@gmail.com 17 Sunil Jha* lakshyaskjha@gmail.com 18 Rajesh Kumar* rajeshkumar.cs06@gmail.com 19 Vikas Garg* sperry.it@gmail.com 20 Bharat Bhushan* bbbadesra@gmail.com 21 Kamlesh Mishra kmishrabhu@gmail.com 22 Anil Dwivedi* anilcs250@gmail.com 23 Ravi Gumber ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 Amit Kakkar amit1kakkar@gmail.com 49 Ashish Kumar Bharti/ Raj Kumar* rajkumar032002@yahoo.com 50 Mohammad Hamid hamind17@gmail.com 51 Lalan Jha lalanjha80@yahoo.com 52 Ratnesh kumar Singh ratnesh6672@gmail.com 53 Vishal Kapoor vishalkapoor1983@gmail.com 54 Amit Kumar amitthakurlic@yahoo.in 55 Jitendra Kumar joyapuru@gmail.com 56 Kunal Malhotra malhotra.kunal91@gmail.com 57 Vidit Sharma vidit.sharma1@hotmail.com 58 Dikshant Singh dikshantraghav@gmail.com 59 Harindra Pal Nagda harindranagda@hotmail.com 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84 Alok Kumar Singh* alokmechboy@gmail.com 85 Mridul Verma mridul_varma@yahoo.co.in 86 Prateek Sharma* prateek.psharma@gmail.com 87 Paramjeet Singh param194@gmail.com 88 Anita Chadha Sanjeev Chadha* sanjeev_chadha35@yahoo.co.in 89 Monica Gulati mini.angel.22@gmail.com 90 Rakesh Chaudhary kumar5104@gmail.com 91 Pradeep Jangra* pradeepjangra87@gmail.com 92 Ramesh Chander - 93 Rahul Mishra rahul.mishra90@gmail.com 94 Prateek Tiwari yesprateek@gmail.com 95 Himanshu Sethi* winiscertain@gmail.com 96 Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod July, 2017. 8. Two sample copies of demand letters. 9. Purchase invoices of various materials purchased during Apr-Sept., 2017. 10. Annexure-1 (Pre-GST impact of Input Tax Credit on Cost). 11. Annexure-2 (Cost Sheet Performa for Goods/Services). 12. Input Tax Credit (VAT) Ledger Account for the period 2016-17. 13. Summary of purchased materials/inputs. 14. VAT and GST Returns 15. Project Report submitted to RERA 5. The report further states that the Respondent had admitted that the ITC was not available during the year 2016-17 but it was available from 01.07.2017 after introduction of the GST. The Respondent had also submitted the following data as has been depicted in the Table below to show that the ITC on Excise Duty, Countervailing Duty (CVD) and capital goods which was not available earlier was now available:- S. No. Nature of pre-GST Tax Total Amount (In Rs.) 1 Excise Duty/CVD included in cost, now available as ITC 46,91,507/- 2 Credit on Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracted work which was an additional cost to him whereas Service Tax was exempted in the past. He had further claimed that there had been tremendous increase in the prices of inputs including Steel due to which no profiteering could be alleged against him. 7. The DGAP s report also states that two of the Applicants viz. S/Sh. Sukhbir Singh and Ashutosh Fotedar vide their joint letter dated 07.05.2018 had submitted that the Respondent could charge maximum allotment rate of ₹ 4,000/- per sq. ft. carpet area which was inclusive of all costs as was prescribed under the Policy. The DGAP has also informed that one of the Applicants viz. Shri Bharat Bhushan Badesara vide his e-mail dated 12.03.2018 had submitted a copy of the Buyer s Agreement executed with the Respondent along with the copies of the demand letters and payment details which have been detailed below:- ( Amount in Rs.) S. No. Payment stages Date Basic % Amount Service Tax VAT CGST SGST Total 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory Authority (RERA) and as per para 5 (i) of the Policy, it was clear that the maximum sale price per sq. feet carpet area had been fixed at ₹ 4,000/- and no minimum rate had been prescribed and hence, the Respondent could not claim that there was restriction on reducing the price. The DGAP has also submitted that the Respondent s claim that Section 171(1) of the CGST Act, 2017 relating to benefit of ITC was not attracted, as there was no reduction in the GST rate was also not acceptable because the conditions of passing on the benefit of reduced tax rate and benefit of ITC were two independent conditions and Section 171 of the CGST Act, 2017 was attracted if both or either of these two conditions existed. 9 The DGAP has also reported that there was merit in the argument of the Respondent which stated that the exact quantum of ITC could be determined only after the completion of the project but he has maintained that the profiteering was required to be established in a time bound manner by considering the ITC available to the Respondent and the price realized by him from the buyers. 10. In his Report the DGAP has admitted that in the pre-GST era, Construction Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - 3109559 5 5478788 36574383 SGST - - - 3109559 5 5478788 36574383 IGST - - - 1197256 8 1829277 13801845 Total 21557942 11476408 33034350 7416375 8 12786853 86950611 Taxable Turnove r 29249554 29 76935214 30018906 43 7256205 66 482186312 12078068 78 ITC ratio to Taxable Value (%) 0.74 14.92 1.1 10.22 2.65 7.2 Addition al ITC availed (%) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Sh. Rajesh Kumar Jain, Bharat Bhushan and 6 other Applicants appeared and the DGAP was represented by Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs). On the request of the parties another hearing was held on 01.08.2018 wherein S/Sh. Bharat Bhushan and R. K. Jain along with 12 other Applicants had appeared. During both the hearings the Respondent was represented by Sh. Dinesh Sharma, Managing Director along with Sh. J. P. Gaur, Chief Finance Officer, who submitted their written submissions, on 1st August, 2018. 15. In his written submissions, the Respondent has claimed that the amounts of ₹ 50,44,57,118/- and ₹ 50,89,40,406/- mentioned in the report of the DGAP were the costs incurred on construction and not the costs of sales during the period and they had no direct relation with the amount collected from the Applicants as the Payment Plan under the Policy was time bound and not construction linked. The Respondent has also mentioned that the payments by the Applicants were to be made in installments i.e. at the time of application 5% of the cost was to be paid, on allotment 20% was to be paid and subsequently the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed that this extra amount charged by subcontractors had not been considered as the part of the cost in the post-GST period. 18. The Respondent has also alleged that while he had received 62.50% of the payment due during the pre-GST period, the amount spent on construction during this period was only 25% of the total cost and hence he would receive 37.50% of total payment due during the post-GST period when he would have to spend 75% of the total cost on construction. The Respondent has also claimed that the initial consideration paid by the Applicants was towards the cost incurred/ to be incurred by him against the cost of land, licenses, approvals, administrative and financial expenses which amounted to 40-45% of the total revenue from the Applicants. He has also submitted that while calculating the ITC against the taxable value during the pre-GST period, the taxable value should be accordingly adjusted by giving effect to the above issues during the pre-GST and post-GST period and percentage of ITC should be accordingly recalculated. 19. Finally the Respondent has prayed that the following points needed to be considered by the Authority before concluding that profitee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which 1% VAT was payable which couldn t be passed on to the Applicants. They also alleged that the Respondent had opted to burden the Applicants by collecting VAT @ 5.25%, which had benefited him. They also claimed that during the same period other builders in the State of Haryana had charged 4.5% VAT which could be substantiated with the demand letters issued to the buyers by such builders. Accordingly the Applicants had claimed that the Respondent had burdened them with extra tax when they were eligible for levy of reduced tax. 24. The Applicants have also pleaded that huge amount of ITC was available to the Respondent which had been availed by him from September, 2017 to February, 2018. This ITC was approximately ₹ 8.70 Crores and was utilized to the extent of ₹ 5.40 Crores for payment of GST by him. They also pleaded that the Respondent was fully aware that the ITC should have been passed on to the buyers after re-calibrating the price, which had not been done deliberately by him which attracted penal provisions under the anti-profiteering law. 25. The Applicants have also attached copies of the e-mail dated 14.07.2018 and reminders dated 21.07.2018 26.07.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have been charged on such reduced amount and hence the effective output rate of GST for the Respondent would be 8% of 93.9 (100-6.1) =7.51%. The DGAP has admitted that the effective rate of tax had gone down for the Respondent by 4.15% before 01.07.2017, 4.07% during the period between 01.07.2017 to 24.01.2018 and by 0.31% for the period w.e.f. 25.01.2018 onwards. His report also stated that the provisions of Section 171 of the CGST Act, 2017 were attracted in respect of both the above periods. He has also stated that earlier the Applicants were paying price of ₹ 4210/- per sq. ft. (Rs. 4000/- + 5.25% VAT). and net increase in the ITC after implementation of GST was 6.1% (7.2%-1.1%), hence, the amount of basic installment charged by the Respondent must first be reduced by 6.1% of ₹ 4000 i.e. by ₹ 244/- and the revised basic installment should be ₹ 4000 - ₹ 244 = ₹ 3756/- per sq. ft. He has further stated that during the period between 30.06.2017 to 24.01.2018, the installment including GST should be ₹ 3756+12% GST= ₹ 4207/-per sq. ft., however, the Respondent had charged ₹ 4000 + 12% GST i.e. ₹ 4480/- which amounted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent is legally not correct to the extent that there had been increase in the rate of tax from 5.25% to 12% and then 8% and no benefit could be passed on by him to the Applicants as the Respondent had become entitled to claim ITC the benefit of which was required to be passed on by him to the Applicants as per the provisions of Section 171. The Respondent has also admitted that he had become eligible to claim ITC after coming in to force of the GST and hence he was liable to pass on the benefit to the Applicants. 31. It is also revealed from the submissions made by the Respondent that he was building flats and selling them to the Applicants as per the Policy 2013, n which various parameters have been laid down and one of the conditions as per para 5 (i) of Policy was that the maximum allotment rate per sq. ft. carpet area has been fixed as ₹ 4000/-. Para 5 (i) of the Policy is reproduced below:- (a) Allotment Rate:- The allotment rate for the Apartment units approved under such projects shall be as follows:- Sr No. Development Plan Maximum allotment rate on per sq. ft. carpet area basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent was obligated to pass on the benefit of ITC in terms of reduction in tax and hence he cannot appropriate the ITC which had become available to him on the GST which had been paid by the Applicants. 32. It is also revealed from the VAT returns filed by the Respondent that he had paid an amount of ₹ 14,91,04,173/- as VAT for a taxable turnover of ₹ 1,64,5287,429/- during the year 2016-17 and his VAT liability was 9% of the net taxable value and his liability was 5.098% of the unabated gross value of ₹ 2,92,49,55,429/-. During the year 2017-18 for the first quarter the taxable turnover was ₹ 7,69,35,214/- while the output tax liability was ₹ 39,21,893/-. Thus the total taxable turnover of these two periods was ₹ 30,01,89,06,44/- while the output tax liability was ₹ 15,30,26,066/- and the ratio of ITC to the taxable turnover was 1.10%. Similarly the taxable value for the period from July 2017 to February 2018 was ₹ 1,20,78,06,878/- while the tax liability was ₹ 12,56,42,894/- and the ITC ratio to taxable turnover was 7.20%. These facts have also not been disputed by the Respondent but what was disputed was that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2 of the Buyer s Agreement The allottee shall pay to the Developer 5% of the total cost at the time of application and shall make payment of 20% at the time of allotment i.e. 25% of total sale consideration at the time of signing of this agreement. The allottee agrees and undertakes to pay 75% balance of the total cost in six equated six monthly installments spread over three years period with no interest falling from the due date of payment (emphasis supplied). Thus every Applicant has paid 5% of the total cost at the time of application, 20% at the time of allotment and 75% balance of the total cost shall be paid in equated six monthly installments spread over three year period. One of the grievances of the Applicants is that 25% of total sale consideration which had been paid at the time of signing of the Buyer s Agreements had earned interest for the Respondent, which had not been taken into consideration while fixing the cost of the flats. Therefore the contention of the Respondent that the cost factor should be taken into account is not valid and justifiable as there is no escalation clause in the Agreement and the Respondent has also availed benefit of interest on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Aug-17 B 72,49,48,683 Sep.17 C 1,59,171 Oct,17 D - Nov.17 E 2,58,475 Dec.17 F 2,54,237 Jan.18 G - Total Basic Sale Price Collected for both the projects during July, 2017 to January, 2018 (Rs.) H= Total of A to G 72,56,20,566 GST @ 12% Collected I=H*12% 8,70,74,468 Actual Amount Collected J=H+I 81,26,95,034 Benefit of 6.10% of Basic Sale Price K=H*6.10% 4,42,62,855 Recalibrated Basic Sale Price L=H-K 68,13,57,711 GST@12% to be collected M=L*12% 8,17,62,925 Total Amount to be collected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3756 GST @X% D X% of C 450.72 300.48 Total Amount to Be Charged E C+D 4206.72 4056.48 Amount Already Charged F A + X% of A 4480 4320 Profiteered Amount per sq. ft. (Rs.) G F-E 273.28 263.52 39. Accordingly, it is held that the Respondent has profiteered an amount of Rs. 8,22,80,998/- from the flat owners. The details of profiteering made by him from the individual flat owners are as under:- Type/ Area (Sq. Ft.) No. of Flats GST @12% GST @8% Total Profiteering in Rs. Instalme nt Amount GST Amoun t Instalme nt + Tax Profite ering % Profite ering Amoun t Instalme nt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11651 170540 13643.2 184183 6.10% 11235 22886 1075664 B/386.64 22 172600 20712 193312 6.10% 11792 172600 13808 186408 6.10% 11371 23163 509584.24 C/398.5 24 176644 21197 197841 6.10% 12068 176644 14131.52 190776 6.10% 11637 23706 568934.995 D/600.42 378 256460 30775 287235 6.10% 17521 256460 20516.8 276977 6.10% 16896 34417 13009600.3 E/603.41 294 257955 30955 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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