TMI Blog2019 (12) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... e period the ratio of ITC to turnover has been computed by the DGAP as 2.42% of the turnover as per Table-B supra. Similarly, the above ratio has been calculated as 10.70% for the post-GST period from 01.07.2017 to 31.08.2018. Accordingly, the DGAP has claimed that the Respondent has benefited to the tune of 8.28% of the turnover which he is required to pass on to his buyers - this Authority determines the profiteered amount as ₹ 4,35,53,927/- (inclusive of applicable GST @ 12% or 8%) for the 1075 residential units for the period from 01.07.2017 to 31.08.2018 as per the details furnished by the DGAP vide Annexure-20 of his above Report. The above amount includes an amount of ₹ 1,74,24,547/- including the GST @ 12% w.e.f. 01.07.2017 to 24.01.2018 and an amount of ₹ 2,61,29,380/- including the GST @ 8% for the period from 25.01.2018 to 31.08.2018. However, the Respondent has passed on ₹ 2,52,63,079/- as benefit of ITC to the above flat buyers as has been duly verified by the DGAP in Table-D. Therefore, the balance profiteered amount of ₹ 1,82,90,848/- [4,35,53,927/- (-) 2,52,63,079/-] is required to be returned to the eligible recipients as per the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER 1. This Report dated 26.02.2019 has been received from the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP), under Rule 129 (6) of the Central Goods Services Tax (CGST) Rules, 2017. The brief facts of the present case are that an application dated 03.05.2018 was filed before the Haryana State Screening Committee on Anti- Profiteering which referred it to the Standing Committee on Anti-profiteering, by the Applicant No. 1, alleging profiteering by the Respondent in respect of purchase of a flat in the Respondent s project Arawali Homes situated at Sector-4, Sohna, Gurgaon, Haryana. The above applicant had alleged that the Respondent was collecting wrong GST post implementation of GST and was not refunding GST collected in the wrong manner, even after sending clarification that the GST was not applicable to Affordable Housing , as the GST amount could be adjusted against the Input Tax Credit (ITC). 2. The above application was examined by the Standing Committee on Anti-profiteering in its meetings held on 07.08.2018 08.08.2018 and was forward to the DGAP for detailed investigation under Rule 129 (1) of the CGST Rules, 2017. 3. The DGAP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITC of VAT, CENVAT for the period from April, 2016 to June, 2017, and GST ITC of GST for the period from July, 2017 to August, 2018 for the project Arawali Homes . (j) List of home buyers of the project Arawali Homes along with the details of GST benefit passed on. (k) Reconciliation of turnover reported in GSTR-3B Return with list of home buyers. (I) Copy of e-mail correspondence with the above Applicant. (m) Sample Copies of letters issued to the customers regarding passing on the GST ITC benefit. 6. DGAP has also submitted that the details of the amounts and the GST paid by the Applicant No. 1 for a flat measuring 467 sq. ft., at the basic sale price of ₹ 3,600/- per sq. ft. as per the Table- A below:- S.No. Payment Stage Due Date Basic% BSP GST Total 1. At the time of submission of the Application 07.10.2016 5.00% 86,500 - 83,560 2. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her recipients. He has further noted that para 5 of Schedule-III of the Central Goods and Services Tax Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) reads as Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building . Further, clause (b) of Paragraph 5 of Schedule II of the Central Goods and Services Tax 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 . Thus, the DGAP has claimed that the ITC pertaining to the residential units which were under construction but not sold was provisional ITC which may be required to be reversed by the Respondent, if such units remained unsold at the time of issue of the Completion Certificate (CC), in terms of Section 17 (2) Section 17 (3) of the Central Goods and Services Tax Act, 2017 which read as under:- Section 17 (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2016, according to which the Respondent was not eligible to avail credit of Central Excise Duty paid on inputs or Service Tax paid on the input services. However, the Respondent was eligible to avail the credit of VAT paid on the purchase of inputs. The DGAP has further contended that post-GST, the Respondent could avail the ITC of GST paid on all the inputs and input services including the sub-contracts. From the information submitted by the Respondent for the period from April, 2016 to August, 2018, the details of ITC availed by him and his turnover from the project Arawali Homes during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to August, 2018) periods the ratios of CENVAT/ITC to turnover are furnished by the DGAP in Table- B below:- Table - B S.No. Particulars April 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) Taxable Turnover @ 12% GST (01.07.2017 to 24.01.2018) Taxable Turnover @ 8% GST (25.012018. to 31.08.2018) Total (Post-GST) 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w of 1/3rd abatement on value, on construction service vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate on construction service in respect of the affordable and low-cost houses upto a carpet area of 60 square metres was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. The DGAP has further stated that in view of the change in the GST rate after 01.07.2017, the issue of profiteering has been examined by him in two parts by comparing the applicable tax rate and the ITC available for the pre-GST period from April, 2016 to June, 2017 when only VAT@ 5.25% was payable with (1) the post-GST period from July, 2017 to 24.01.2018 when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.08.2018 when the effective GST rate was 8%. Accordingly, on the basis of the figures contained in Table-B above, the DGAP has tabulated the comparative figures of ITC availed/available during pre-GST period and post-GST period in the Table- C below:- Table- C (Amount in Rs.) S.No. Particulars Post-GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit of the additional ITC was required to be passed on to the recipients. The DGAP has also submitted that the Respondent has not contested that benefit of ITC would eventually have to be passed on to the recipients and the Respondent has claimed that he has passed on an amount of ₹ 27,5561- to the Applicant No. 1 which has been duly verified by the DGAP from the Applicant No. l s ledger account submitted by the Respondent. 11. The DGAP has also stated 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 Applicant and the other home buyers during the period from 01.07.2017 to 24.01.2018, the profiteered amount came to ₹ 1,74,24,547/- which includes 12% GST on the base profiteered amount of ₹ 1,55,57,631/- and the profiteered amount during the period from 25.01.2018 to 31.08.2018, came to ₹ 2,61,29,3801- which includes 8% GST on the base profiteered amount of ₹ 2,41,93,870/-. Therefore, the total profiteered amount during the period from 01.07.2017 to 31.08.2018 came to ₹ 4,35,53,927/- which includes GST @ 12% or 8% on the base profiteered amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The DGAP has also contended that the Respondent has passed on lesser benefit than what he should have passed in respect of 1075 flats mentioned at Sr. No. 1 2 of the above Table amounting to ₹ 1,82,90,848/- as per the details furnished in Annexure-21. 13. The DGAP has also submitted that the benefit of additional ITC to the tune of 8.28% of the turnover has, in fact, accrued to the Respondent and the same was required to be passed on to the Applicant No. 1 and the other recipients, thus, the Respondent has contravened the provisions of Section 171 of the Central Goods and Services Tax Act, 2017 in as much as the additional benefit of ITC @ 8.28% of the base price received by the Respondent during the period from 01.07.2017 to 31.08.2018 has not been passed on. The Respondent has further submitted that the Respondent has realized an excess amount of ₹ 39,419/- from the Applicant No. 1 which includes both the profiteered amount @ 8.28% of the base price and GST on the said profiteered amount. He has also claimed that the Respondent has passed on benefit of ₹ 27,556/- to the Applicant No. 1 which has been duly verified by him and therefore, the Respondent has i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 and 06.06.2019 which may be summed up as follows:- I. That the respondent was engaged in the real estate business and was developing an affordable residential complex in Gurugram (Haryana) and he was executing only one such project Arawali Homes in Sector 4, Sohna, Gurugram (Haryana). II. That the Ministry of Finance, Government of India has issued Notification No. 03/2019-Central Tax (Rate) dated 29.09.2019 (29.03.2019) and he was trying to analyze the effect of this Notification on the ITC available to him III. That in the present affordable residential project, various provisions of the indirect tax laws were applicable viz. the Haryana VAT Act, 2003, Service Tax Law, Central Excise Act, Central Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Rules, 2017. IV. That the DGAP has not considered provisions of Section 171 of the Central Goods and Service Tax Act, 2017 properly in his investigation Report. V. That as per Section 171 of the CGST, 2017 if there was any additional benefit of ITC available under the GST regime which was not available earlier then that benefit has to be passed on to the customers by way of reduction in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Authority. 17. We have carefully considered the Report of the DGAP, submissions made by the Respondent and based on the record it is revealed that the Respondent is executing an affordable Housing Scheme approved by the Government of Haryana under the name and style of Arawali Homes in which he has sold 1560 flats till 31.03.2019. On examining the various submissions we find that the following issues need to be addressed:- a. Whether there was reduction in the rate of tax on the construction service provided by the Respondent w.e.f. 01.07.2017? b. Whether there was any net additional benefit of ITC which has accrued to the Respondent which was required to be passed on by him to his recipients? c. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017, by not passing on the above benefits by the Respondent? 18. Perusal of the Report dated 26.02.2019 furnished by the DGAP shows that after taking into account the benefit of credit available during the pre-GST period from April, 2016 to June, 2017 to the taxable turnover received during the above period the ratio of ITC to turnover has been computed by the DGAP as 2.42% of the tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 3 months from the date of issue of this Order to the Applicant No. 1 and the other eligible house buyers by the Respondent along with interest @ 18% from the date from which these amounts were realised by the Respondent from them, till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which the above amounts shall be recovered by the concerned Commissioner CGST / SGST and paid to the eligible house buyers. 21. From the above discussions it is clear that the Respondent has profiteered by an amount of ₹ 4,35,53,927/- during the period of investigation. Therefore, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 30.08.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 or other buyers they shall be at liberty to approach the State Screening Committee Haryana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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