TMI Blog2019 (3) TMI 1470X X X X Extracts X X X X X X X X Extracts X X X X ..... y the DGAP's Report that the benefit of additional ITC of 3.04% of the taxable turnover during the period w.e.f. 01.07.2017 to 31.08.2018 and the amount outstanding as on 31.08.2018, has accrued to the Respondent and the same was required to be passed on to the Applicants and the other flat buyers. The DGAP has calculated the amount of ITC as ₹ 37,24,923/- which was availed by the Respondent vide Table-D supra on the basis of the information supplied by the Respondent and hence the calculation done by him can be relied upon. The DGAP has also computed the amount of profiteering as ₹ 38,29,753/- vide Table-F on the basis of the details supplied by the Respondent himself which he has not challenged and hence the amount of profiteering assessed by the DGAP can be deemed to be correct. The DGAP has also computed the details of the benefit of ITC which is required to be passed on by the Respondent to each flat buyer as per Annexure-14 which has been accepted by the Respondent. The Respondent at no stage has objected to the calculation of the additional ITC availed by him or the profiteered amount made by the DGAP and has rather admitted the computation of both as correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (ITC) by way of commensurate reduction in the price of the flat purchased by them. They had also claimed that the Respondent had committed contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against him. 2. The Standing Committee vide the minutes of its meetings dated 07.08.2018 08.08.2018 had requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 and collect evidence necessary to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients or not? 3. After examination of the application filed by the Applicants, the DGAP had found that the Applicants had booked a flat with the Respondent on 01.05.2017, before coming into force of the GST. He has also given the following schedule of demands raised by the Respondent on booking of the flat by the Applicants as per the Table-A below:- Table-A (Amount in Rs.) Particulars BSP Service Tax GST@12% GST Benefit passed on Total Agreement V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal allotment was made to them vide letter dated 20.05.2017 and the agreement to sell was executed on 22.05.2017. The DGAP has also intimated that the Respondent had further stated that meanwhile, the GST had come in to force w.e.f. 01.07.2017 and the flat was almost complete and hence as per the agreement dated 22.05.2017, the Applicants were asked to pay ₹ 59,14,590 plus taxes as per the following schedule:- i. Amount on booking- ₹ 1,00,000/- including Service Tax @ 4.5%. ii. Within 60 days from booking- ₹ 52,27,437/- plus Service Tax/GST. iii. On offer of possession- ₹ 5,91 ,459/- plus GST. The Respondent had also submitted that the Applicants had deposited an amount of ₹ 50,40,000/- including 12% GST and were verbally informed that since the building was almost complete the Respondent would not be eligible to avail full benefit of ITC but whatever ITC he would be availing the benefit of the same would be transferred to the allottees, in proportion to the amount outstanding as on 01.07.2017. The Respondent had further submitted that the completion certificate was issued on 06.08.2018 and during the months of August and September, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, 2018, GSTR-3B returns for July, 2017 to August, 2018, TRAN-I returns for the transitional credit availed, VAT ST-3 returns for April, 2016 to June, 2017, all demand letters, payment receipts, booking form agreement to sell issued to the Applicants, tax rates - pre-GST and post-GST, Balance Sheet for the FY 2016-17 FY 2017-18 Electronic Credit Ledger for 01.07.2017 to 14.11.2018, CENVAT/lnput Tax Credit register for April, 2016 to June, 2017, Project Completion Certificate along with working of proportionate ITC reversed on unsold units, details of turnover, output liability, GST payable and the ITC availed, list of home buyers in the project Vrindavan Yojna and communication to all the customers about passing on of the GST benefit along with cheques of benefit passed on. 8. The DGAP has further informed that the main issue for determination in the present case was whether there was reduction in the rate of tax or the benefit of ITC was available to the Respondent on the supply of construction service after implementation of the GST w.e.f. 01.07 2017 and if so, whether any benefit was required to be passed on to the recipients by him in terms of Section 171 of the CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,07,487 65,57,579 10. The DGAP has also contended that in this case since the completion certificate had been received by the Respondent on 06.08.2018, neither ITC would accrue to the Respondent nor it could be availed by him after the above date. He has further contended that the exact quantum of ITC availed by the Respondent till the completion of the project was available on record and the same was required to be passed on to the Applicants and the other recipients proportionate to the consideration paid and payable post implementation of the GST. The DGAP has also stated that the Respondent had suo moto admitted that there had been benefit of ITC available to him and he had passed on the benefit of ITC to the Applicants by issuing Cheque No. 548522 dated 13.11.2018 for an amount of Rs. which amounted to 2.75% of the amount outstanding from the above Applicants as on 01.07.2017. The DGAP has further stated that the Respondent had passed on the benefit of ITC to the other flat buyers also at the time of giving possession, @2.75% of their respective outstanding amounts as on the date of implementation of the GST, i.e. 01.07.2017 and on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount Total Saleable Area of Flats (in sq. mtrs.) A 17300.88 Area Sold before completion certificate is obtained (in sq. mtrs.) B 7606.28 Area sold before completion certificate is obtained (in Percentage) C=B/A 43.96% Area remaining Unsold before completion certificate is obtained (in sq. mtrs.) D=A-B 9,694.60 Area remaining Unsold before completion certificate is obtained (in Percentage) E=D/A 56.04% ITC available for the period between July, 2017 till Completion Certificate received as per GSTR-3B F 84,72,530 Proportionate ITC to be reversed (in Rs.) G=F*E 47,47,608 Input Tax Credit Availed post GST pertaining to sold Units H=F-G 37,24,923 The DGAP has also informed that after verification from the GSTR-3B return filed for the month of Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above computation the DGAP has stated 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 0.27% and during the post-GST period w.e.f. July, 2017 to August, 2018, it was 3.31% which confirmed that post-GST, the Respondent had benefited from additional ITC to the extent of 3.04% [3.31 %(-) 0.27%] of the total turnover. The DGAP has claimed that the quantum of profiteering has been examined by comparing the applicable tax and the ITC available for the pre-GST period from April, 2016 to June, 2017 when the Service Tax @4.5% was payable, with the post-GST period w.e.f. July, 2017 to August, 2018, when the effective GST rate was 12% (GST @18% along with 1/3rd abatement on value) on the construction service, notified vide Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017. He has further intimated that on the basis of the figures mentioned in Table-E above, the comparative figures of ITC availed/available during the pre-GST period and the post-GST period had been tabulated in the Table-F given below:- Table-F (Amount in Rs.) S. No. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The DGAP has submitted that from the above table, it was clear that the additional ITC of 3.04% of the amount received and the balance amount as on 31.08.2018, should have resulted in commensurate reduction in the base price as well as cum-tax price and the Respondent in terms of Section 171 of the CGST Act, 2017, was required to pass on the above benefit to the recipients. The DGAP has further submitted that the Respondent had admitted that the benefit would have to be passed on to the recipients and in fact he had already passed on an amount of ₹ 30,73,671/- which had been duly verified from the copies of the cheques issued by the Respondent. 14. The DGAP has also claimed that on the basis of the aforesaid CENVAT/ITC availability pre and post-GST and the details of the amount collected by the Respondent from the Applicants and the other home buyers during the period from 01.07.2017 to 31.08.2018 and the amount outstanding as on 31.08.2018, the amount of benefit of ITC that needed to be passed on by the Respondent to the recipients or the profiteered amount came to ₹ 38,29,753/- which included 12% GST on the base profiteered amount of ₹ 34,19,422/-. This amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the GST on the profiteered amount from 64 other recipients who are not applicants in the present proceedings. He has also intimated that all these recipients were identifiable as the Respondent has supplied their names and addresses along with the unit no. allotted to them and hence, the additional amount of ₹ 7,17,979/- was required to be passed on to such eligible flat buyers. 17. The above Report was considered by the Authority in its sitting held on 03.11.2018 and it was decided to hear the Applicants and the Respondent on 19.12.2018. 18. The first hearing was held on 19.12.2018 wherein the Applicants were represented by Shri Vivek Gupta; Applicant No. 3 was represented by Sh. Rana Ashok Rajneesh, Assistant Commissioner and the Respondent was represented by Sh. Satpal Singh, Director. 19. The Respondent has filed written submissions on 20.12.2018 through which he has intimated that the Applicants had offered to purchase flat No. A-701 for total consideration of ₹ 59,14,590/- excluding taxes and had paid advance of ₹ 1,00,000/- on 01.05.2017 which was accepted by the Respondent on the understanding that the basic cost and the taxes as applicable wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent through his submissions dated 20.12.2018. The DGAP vide his Report dated 02.01 9019 has intimated that the issues raised by the Respondent had already been covered in the Investigation Report itself. 21. We have carefully perused the DGAP's Report, the written submissions of the Respondent and all the other material placed on record. The issues to be decided by this Authority in this case are as under:- 1) Whether there was any violation of the provisions of Section 171 (1) of the CGST Act, 2017 in this case? 2) If yes then what was the quantum of profiteering? 22. Perusal of Section 171 of the CGST Act shows that it provides as under:- (1). Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. 23. It is clear from the plain reading of Section 171 (1) mentioned above that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 133 (1) of the CGST Rules, 2017 is determined as ₹ 38,29,753/- including the GST @12% on the base profiteered amount of ₹ 34,19,422/- as per the details furnished by the DGAP. Accordingly, under Rule 133 (3) (a) of the CGST Rules, 2017 it is ordered that the Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC availed by him as has been detailed above. The above amount of profiteering includes an amount of ₹ 1,98,122/- including GST @12% on the base amount of ₹ 1,76,894/- which has been profiteered by the Respondent from the Applicants. The Respondent has already refunded ₹ 1,60,020/- to the Applicants and has further paid an amount of ₹ 38102/- to them vide Cheque No. 548567 dated 14.12.2018 (Total ₹ 1,60,020+Rs. 38102=Rs. 1,98,122). However, he has not paid interest @18% to the above Applicants from the date from which the above amount was profiteered by him. Therefore, the Respondent is directed to pay interest to the Applicants @18% from the above date. The Respondent is also directed to refund an amount of ₹ 7,17,979/- to the rest of the flat buyers. The Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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