9911796707
Advanced Search 
TMI Blog2019 (3) TMI 1470X X X X Extracts X X X X X X X X Extracts X X X X ..... i-profiteering, under Rule 128 of the CGST Rules, 2017. The Applicants had stated in their complaint that the Respondent had resorted to profiteering in respect of the purchase of Flat No. A701, constructed by the Respondent in his "Vrindavan Yojna Project", Rae Bareli Road, Lucknow. The Applicants had further alleged that the Respondent had increased the price of the flat after implementation of the Goods & Service Tax (GST) w.e.f. 01.07.2017 and had not passed on the benefit of Input Tax Credit (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 foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 59,14,590 plus taxes as per the following schedule:- i. Amount on booking- Rs. 1,00,000/- including Service Tax @ 4.5%. ii. Within 60 days from booking- Rs. 52,27,437/- plus Service Tax/GST. iii. On offer of possession- Rs. 5,91 ,459/- plus GST. The Respondent had also submitted that the Applicants had deposited an amount of Rs. 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, 2018, the Applicants were intimated that the flat was ready for possession and as per his calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 CGST Act, 2017. 9. The DGAP has also submitted that the Respondent vide his replies dated 01.10.2018 & 10.10.2018 had supplied copy of the agreement to sell executed by him with the Applicants, agreement form and the demand letters issued by him to the Applicants for the purchase of flat No. A701, measuring 1,762 square feet, at the basic sale price of Rs. 3,357/- per square feet. He has also intimated the details of the amounts and the taxes paid by the above Applicants to the Respondent as per the Table-C given below:- Table-C (Amount in Rs.) S.No. Payment Stages Due Date Basic % BSP Other Charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply of goods nor a supply of services reads as "Sale of land and, subject to clause (b) of para 5 of Schedule Il, sale of building" and Clause (b) of para 5 of Schedule II of the CGST Act, 2017 reads as "(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier". He has therefore, contended that in view of these provisions, the ITC in respect of the units not sold was required to be reversed in terms of Sections 17 (2) & 17 (3) of the CGST Act, 2017 which read as under:- 17 (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. 17 (3) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 463 - - - 2 Input Tax Credit of GST Availed as per GST Return (B) - - - 37,24,923 - 37,24,923 3 Total Taxable Turnover as per Returns (C) 8,04,63,461 4,95,43,604 13,00,07,065 - - - 4 Total Taxable Turnover Post GST (D) - - - 7,75,23,049 3,49,57,942 11,24,80,991 5 Ratio of CENVAT/ Input Tax Credit to Taxable Turnover [(E)=(A)/(C)] or [(E)=(B)/D)] 0.27% 3.31% 13. Based on the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 Rs. 38,29,753/- which included 12% GST on the base profiteered amount of Rs. 34,19,422/-. This amount was inclusive of Rs. 1,98,122/- including GST on the base amount of Rs. 1,76,894/- which was the profiteered amount in respect of the above Applicants. The DGAP has submitted the details of the home buyers unit no. wise and the profiteered amount along with the amount which is required to be returned to them on account of benefit of ITC as per Annexure-14 attached with his Report. 15. The DGAP has further intimated that the service was supplied in the State of Uttar Pradesh only and the Respondent has suo moto passed on the benefit of ITC in the month of August 2018 and afterwards even prior to issue of Notice on 10.09.2018 by him. He has further intimated that the Respondent has already passed on the benefit of Rs. 30,73,671/- which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector. 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 Rs. 59,14,590/- excluding taxes and had paid advance of Rs. 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 would be charged and an agreement to sell was accordingly signed. He has further stated that at the time of purchase, the building was 85% to 90% complete and on coming in to force of the G.S.T. @12%, with effect from 01.07.2017, the Applicants were informed that the benefit of ITC would be passed on proportionately on the basic amount that would be availed by him on or after 01.07.2017. He has also claimed that the Applicants had liberty of cancelling the allotment and get refund as was done by some other buyers. He has further claimed that the Applicants had paid a sum of Rs. 50,40,000/- including GST on 14.08.2017 which showed that they were liable to pay GST @12%. He has also claimed that he had worked out the quantum of input of GST to be passed on to the flat buyers which came to be approx 2.75% by the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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's Report that there has been no reduction in the rate of tax hence, this issue is not relevant in this case. On the issue of passing on the benefit of ITC in the post-GST era, it has been revealed by 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 Rs. 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. He has also computed the ratio of ITC to the taxable turnover which was available to the Respondent before coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 Rs. 7,17,979/- to the rest of the flat buyers. The Respondent has not submitted the details of the above amount which he had agreed to refund to the other 64 flat owners accordingly, he is directed to refund an amount of Rs. 7,17,979/- to them along with the interest @18% from the date when the above amount was profiteered by him till the date of payment as per the provisions of Rule 133 (3) (b) of the above Rules. All these amounts and interest shall be paid by the Respondent within a period of 3 months from the date of this order failing which the same shall be recovered by the concerned Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017, under the supervision of the DGAP. A detailed Report confirming the action taken on the directions passed vide this order shall be submitted by the concerned Commissioner CGST/SGST within a period of 4 months from the date of this order. 26. It is evident from the above that the Respondent has d ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
