TMI Blog2019 (3) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... ,59,38,195 (3.6%) in pre GST when compared to ₹ 3,09,70,006 (6.49%) in the post GST period thus providing him the net benefit of ITC of 2.84%. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent as and when the remaining residential/commercial units are sold. The Respondent's Annexures dated 19.02.2019 and 25.02.2019 which comprise of the details of payments made through various modes are taken on record. As per this Annexure the Respondent has paid to the Applicant No. 1 and 473 other home buyers the entire profiteered amount through cheques as has been shown in the Annexures. The Respondent has also stated that to 177 home buyers the profiteered amount has been passed on through the credit notes and letters to this effect have been sent to all these home buyers. Thus, the Respondent has denied benefit of ITC to the buyers of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmit reply as to the whether the ITC benefit was passed on by him to his recipients and also asked him to suo-moto determine the quantum of benefit which was not passed on. The Respondent had submitted replies vide letters dated 20.09.2018, 10.10.2018, 16.10.2018, 01.11.2018, 12.11.2018, 13.11.2018, 14.11.2018, 15.11.2018, 19.11.2018, 22.11.2018 and 26.11.2018 stating that he was in the business of construction of flats under the Affordable Housing Scheme sanctioned under the Haryana Affordable Housing Policy, 2013 in Sector-82, Faridabad. The Respondent had also stated that after implementation of the GST w.e.f. 01.07.2017, the ITC on purchase of materials during July, 2017 and August, 2017 was negligible and he had raised the first demand without giving the benefit of ITC by changing GST @ 12% on 14.08.2017. He had further stated that he had raised the next demand on 14.02.2018 by levying GST @ 8% due to change in the rate of tax as per the Notification issued on 25.01.2018 and had given the benefit of ITC provisionally and informed the buyers that the benefit of ITC would be passed on to them at the time of handing over possession of the flats. The Respondent also submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stage Due Date Basic % BSP Benefit Passed on Service Tax GST Total 1 Application for allotment (Date of Draw) 27.08.2015 5.00% 1,24,919 4,372 1,29,291 2 On allotment 11.09.2015 20.00% 4,99,674 17,489 5,17,163 3 Date of Draw+6 months 22.03.2016 12.50% 3,12,296 3,12,296 4 Date of Draw+12 months 27.08.2016 12.50% 3,12,296 3,12,296 5 Date of Draw+18 months 27.02.2017 12.50% 3,12,296 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the data submitted by the Respondent duly verified from his returns filed during the pre-GST period (April, 2016 to June, 2017) and the post-GST period (July, 2017 to August, 2018), the details of the ITC availed and the taxable turnover during the above periods were as under:- Table B (Amount in Rs.) S. No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (pre-GST) 01.07.2017 to 24.01.2018 25.01.2018 to 31.08.2018 Total (Post-GST) 1 CENVAT of Service Tax Paid on Input Services used for Commercial Shops A 19,06,672 1,49,961 20,56,633 2 Input Tax Credit of VAT Paid on Purchase of Inputs B 1,36,94,480 32,37,996 1,69,32,476 3 Total CENVAT/Input Tax credit Available (C) = (A+B) 1,56,01,152 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.49% 9. The DGAP has also contented that from the above Table, it was clear that 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 3.65% and during the post-GST period w.e.f. July, 2017 to August, 2018, it was 6.49%. The Report has further claimed that this data duly confirmed that post-GST, the Respondent had benefited from additional ITC to the extent of 2.84% [6.49% (-) 3.65%] of the taxable turnover. The DGAP has also noted that the Central Government, on the recommendation of the GST Council, had levied 18% GST, effective rate of which was 12% in view of 1/3 rd abatement on the value of land on construction service vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. He has further noted that the actual 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-Central Tax (Rate) dated 25.01.2018. In view of the change in the GST rate after 01.07.2017, the DGAP has examined the issue of profiteering in two parts, i.e., by comparing the applicable tax rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I= F* (1-E) or 97.16% of F 20,04,75,252 26,28,49,115 46,33,24,370 10 GST @12% J=I*12% 240,57,031 210,27,929 450,84,960 11 Commensurate demand price K=I+J 22,45,32,286 28,38,77,044 50,84,09,330 12 Excess Collection of Demand or Profiteering Amount L=H-K 65,63,109 82,97,765 1,48,60,874 10. The DGAP has also intimated that, it was quite clear from the above Table that the additional ITC of 2.84% of the taxable turnover should have resulted in commensurate reduction in the base price and therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of the additional ITC that had accrued to the Respondent, was required to be passed on to the flat buyers. The DGAP has further intimated that the Respondent had admitted that any benefit of ITC would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount Received Post GST Profiteering Amt. as per Annex-21 Benefit Passed On by Respondent Difference Remark A B C D E F G H=F-G I 1 Applicant (Residential) 1 618 7,63,482 23,772 12,492 11,280 Further Benefit to be passed on as per Annex-22 2 Other Buyers (Residential) 650 3,07,425 40,32,91,960 1,25,35,181 70,71,541 54,63,640 Further Benefit to be passed on as per Annex-22 3 Other Buyers (Residential) 100 44,966 6,33,27,248 20,00,231 37,76,938 -17,76,707 Excess Benefit passed on. 4 Oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Respondent had passed on higher benefit compared to what he should have passed to 129 buyers of residential flats (Sr. No. 3 4 of the above table) amounting to ₹ 20,49,317/-, however, this amount of excess benefit passed on couldn't be set off against the additional benefit to be passed on to other recipients, but could be adjusted against the future demands from such 129 home buyers. 14. The DGAP has concluded that the benefit of additional ITC of 2.84% of the taxable turnover which had accrued to the Respondent was required to be passed on to the above Applicant and the other recipients and the provision of Section 171 of the CGST Act, 2017 had been contravened by the Respondent in as much as the additional benefit of ITC @2.84% of the base price received by the Respondent during the period w.e.f. 01.07.2017 to 31.08.2018, has not been passed on to the Applicant and other recipients by the Respondent. He has further claimed that on this account, the Respondent had realized an additional amount of ₹ 23,772/- (Sr No. 1 of table- 'D' in para-19) from the above Applicant which included both the profiteered amount @2.84% of the taxable amount (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eering as calculated by the DGAP would be passed on to all the buyers for both the residential and the commercial units. He also reiterated that the major amount as calculated by the DGAP had already been passed on and the balance amount will be paid in due course. On 18.02.2019 the Respondent further submitted that with reference to the DGAP's notice dated 20.12.2018, he had passed on the ITC to the customers as per the calculation given by the DGAP as has been calculated vide Annexure-22 of the DGAP's Report along with interest @ 18%. In his letter dated 18.02.2019 he has also stated that the cheques have been sent to all the buyers along with the interest who have made full payment for their flat as on 31.08.2018. He also enclosed copies of the letters written to the flat buyers along with the copies of the cheque. It was also submitted that to all those buyers whose instalments were pending, letters have been issued to the effect that the ITC as per the DGAP's calculation is being credited into their ledgers. He has also intimated that if any further benefit of ITC would be available to him it would be passed on at the time of possession of the flats. It has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (iii) to order; (a) reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent. from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Fund referred to in section 57; (c) imposition of penalty as specified in the Act; and (d) cancellation of registration under the Act. 20. Accordingly, the Authority is to examine whether there has been any benefit of reduction in the rate of tax or ITC that needs to be passed on to the recipients by way of commensurate reduction in prices. From the various documents submitted by the Respondent it is apparent that the Respondent has constructed 852 units out of which 816 are residential and 36 are commercial units. The total saleable carpet area is 3,96,950 sq. ft., out of which 3,81,640 sq. ft. is for the residential units while 15,310 sq. ft. is for the commercial units. Out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount as ₹ 65,63,109 from all the buyers for the period w.e.f. 01.07.2017 to 24.01.2018 and an amount of ₹ 82,97,765 for the period between 25.01.2018 to 31.08.2018 taking into account the GST effective rate of 8% and net benefit of ITC of 2.84%. Thus the Respondent has profiteered total amount of ₹ 1,48,60,875 for the period from 01.07.2017 to 31.08.2018 in respect of all the 651 residential units and 13 commercial units. The above calculations of the profiteered amount has been duly admitted to be correct by the Respondent and he has willingly accepted to pass on the benefit of additional ITC which had become due to him after coming into force of the ITC. 23. From the documents placed on record and the DGAP's report it is evident that the Respondent has sold 780 units out of 816 residential units, out of which for 29 units there was no consideration paid after introduction of GST, hence the profiteered amount has to be calculated only for 751 units which have been sold and consideration received. Out of these 751 home buyers the DGAP has admitted that for 100 buyers the entire profiteered amount has already been paid, Hence in respect of 651 units as has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be paid, he has credited the same into their accounts. Needless to mention that all such refunds adjustments shall be done by paying interest @ 18% from the date of the receipt of the amount by the Respondent from the buyers till the date the due amount is refunded/adjusted The details of payment of balance profiteered amount of ₹ 57,76,610 are shown below:- Residential Home Buyers No. of Units Amount (Rs.) Paid through Cheque 474 43,14,358/- Credited through Ledger Entries 177 11,60,562/- Total 651 54,74,920/- Commercial Units 13 3,01,690/- Grand Total 57,76,610/- 25. It is evident from the above that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price ..... X X X X Extracts X X X X X X X X Extracts X X X X
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