TMI Blog2020 (3) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... DGAP s Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period from April-2016 to June-2017 was NIL and during the post-GST period from July-2017 to March-2019, it was 11.97%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 11.97% (11.97%-0%) of his turnover and the same was required to be passed on by him to the Applicant No. 1 and the other recipients. The amount of the benefit of ITC to be passed by the Respondent to his buyers or the profiteered amount, during the period from 01.07.2017 to 31.03.2019, is determined as ₹ 35,98,596/- which includes 18% GST on the base profiteered amount of ₹ 30,49,658/- as has been detailed in Annexure-12 of the DGAP s Report dated 30.08.2019, as per Rule 133 (1) of the CGST Rules, 2017. The profiteered amount in respect of the Applicant No. 1 is determined as ₹ 19,953/- which also includes GST @18%. 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 customers/buyers commensurate with the benefit of ITC received by him as has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent s project Mayur Residency Extension . He had also alleged that the Respondent had charged GST @ 18% on the construction service/ works contract service and had not passed on the benefit of input Tax Credit (ITC) to him by way of commensurate reduction in the price of the house after implementation of the GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017. The said application was examined by the Standing Committee on Anti-profiteering in its meeting held on 11.03.2019 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 (1) of the CGST Act, 2017, it had forwarded the same with its recommendation to the DGAP for a detailed investigation. The aforesaid recommendation was received by the DGAP on 27.03.2019 (Annexure-2). 2. The DGAP in his Report dated 30.08.2019 has stated that the Applicant No. 1 had submitted copies of the written communication held by him with the Respondent and copies of the demand letters alongwith his application. 3. Thereafter, the DGAP on receipt of the reference from the Standing Committee on Anti Profiteering, had issued a notice to the Respondent on 09.04.2019 (Annexure-3) un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was calculating the final impact of proportionate ITC. 6. The DGAP in his Report has further stated that vide the aforesaid letters/e-mails, the Respondent had submitted the following documents/information:- a. Copies of GSTR-1 and GSTR-3B Returns for the period from July, 2017 to March, 2019. b. Service Tax and VAT Returns for the period from April, 2016 to June, 2017. c. Copies of TRAN-1 Returns for the transitional credit availed by the Respondent. d. Copies of VAT ST-3 Returns for the period from April, 2016 to June, 2017. e. Electronic Credit Ledger for the period from July, 2017 to March, 2019. f. Tax rates, pre-GST and post-GST. g. Copies of Balance Sheets for the FY 2016-17 2017-18. h. Payment plan of the Applicant No. 1 alongwith agreement and demand letters. i. Details of turnover and ITC in respect of the project Mayur Residency Extension . j. List of home buyers in the project Mayur Residency Extension . 7. The DGAP has further stated that the Respondent had requested to treat all the data submitted by him as confidential, in terms of Rule 130 of the CGST Rules, 2017. 8. The DGAP in his Report has fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Credit of VAT paid on Inputs (B) - - 3. Total CENVAT/VAT Credit Available (C)= (A+B) - - 4. Input Tax Credit of GST (D) - 30,49,658 5. Total Turnover as per Home buyers list (E) 26214799.00 2,54,69,428 6. Total Saleable Area of Flats in the project (in Sq.mt.) (F) 6077.50 6077.50 7. Area Sold relevant to Turnover as per Home buyers list (G) 2673.7 6077.50 8. Relevant CENVAT/Input Tax Credit (H)=[(C) or D*(G)/(F)] - 30,49,658 9. Ratio of CENVAT/ Input Tax Credit to Turnover [(I)=(H)/(E)]*100 0.00% 11.97% 12. The DGAP has also claimed that as per Table-A, the ITC as a percentage of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 Recalibrated Basic Price H=E*(1-D) or 88.03% of H 2,24,19,770 8 GST @18% on recalibrated Basic Price I=H*18% 40,35,559 9 Commensurate Demand J=H+I 2,64,55,329 10 Excess Realization or Profiteered Amount K=G-J 35,98,596 13. The DGAP in his Report has also contended that as per Table-B, the additional ITC of 11.97% of the turnover should have resulted in commensurate reduction in the basic prices as well as cum-tax prices of the houses. As per the provisions of Section 171 of the CGST Act, 2017, the benefit of additional ITC was required to be passed on to the recipients. He has further contended that whereas the Respondent had stated that any such benefit would eventually be passed on to the recipients at the time of giving possession of the flats, the profiteering had to be arrived at a given point of time, in terms of Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6441- has been realized by the Respondent from 33 other recipients (excluding the Applicant No. 1) which included both the profiteered amount @ 11.97% of the basic prices and GST @ 18% on the said profiteered amount. The said 33 recipients were identifiable as per the documents provided by the Respondent and hence the above amount was required to be passed on to them. 16. The DGAP has also stated that the present investigation covered the period from 01.07.2017 to 31.03.2019 and profiteering, if any, for the period post March, 2019 had not been examined as the exact quantum of ITC that would be available to the Respondent in future could not be determined at this stage when the construction of the project was yet to be completed. 17. The above investigation Report was received by this Authority from the DGAP on 02.09.2019 and was considered in its sitting held on 03.09.2019 and it was decided to accord opportunity of hearing to the Applicants and the Respondent on 19.09.2019. Accordingly, Notice dated 09.09.2019 was also issued to the Respondent directing him to explain why the Report dated 30.08.2019 furnished by the DGAP should not be accepted and his liability for violatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 17521.00 12.82 Work Contract Rates 2017 19623.52 12.00 Reduced Contract Rate 2017 16820.00 -14.29 c. That he has been regularly increasing his basic rate till 2016 and has reduced his rate in the post GST regime from ₹ 17,521/- per sq. mt. to ₹ 16,820/- per sq. mt. which was 4% of the basic price/consideration (i.e. ₹ 17,521/ - minus ₹ 16,820/- equal to ₹ 701/-, which was 4% of ₹ 17521/-) to pass on the 4% ITC to the customers. d. That in the normal course, his basic rate for 2017 was proposed as ₹ 19,623/- per sq. mt. but he had decided to reduce the price/consideration commensurate with the benefit provided through the ITC of GST. Thus, the price/consideration was reduced by 14.29% to ₹ 16,820/- per sq. mt. although the ITC was to be much lower than 14.29% (i.e. approx. 11.97% as per DGAP s Report). His intention was bona fide to transfer the maximum ITC benefit to the customers and to minimise any extra bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid at the time of completion of the project. f. That he was attaching calculation sheet duly acknowledged by the customers as evidence in support of reduction in the price/consideration from ₹ 17,521/- to ₹ 16,8201- and final payment of amount of the ITC benefit. The details of the calculations furnished by him are as per the Table-D below:- Table - D (Amount in Rs.) S.No. Particulars Pre-GST Post- GST Period A April, 2016 to June, 2017 July, 2017 to March, 2019 1 Tax Rate B 6% 18% 2 Ratio of CENVAT credit/ Input Tax Credit to Turnover C 0.00% 11.97% 3 Increase in input tax credit availed post-GST (%) D=11.97% les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Post GST demand 25469348.60 Amount received/demand raised pre GST period 0.00 A: Input GST benefit by way of reduction in price/consideration Particulars Work/payment completed in % Pre GST rates Amount due Amount due pre GST 17521.00 26530823.83 Service rendered in pre GST 0.00 17521.00 0.00 Balance amount due after post GST regime 100.00 16820.00 25469348.60 Net amount due after passing GST benefit 100.00 16820.00 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 4584482.75 Amount passed on by way of input:6=(a+b)=(1+2) 6 2080249.17 Final net GST burden:7=(5-6) 7 2504233.57 % of final input GST burden:8=(7/4)*100 8 9.83 % of final input GST benefit passed on:9=(7/4)*100 8 7.84 h. That as per his calculation ₹ 4,14,587/- was the profiteered amount which was to be passed on to the customers. i. That as per his calculation the amount to be passed on to the Applicant No. 1 was ₹ 11,532.04/- instead of ₹ 19,953/- as was mentioned in the DGAP s Report. The calculation of the profiteered amount due to the Applicant No. furnished by the Respondent as below:- Before GST rates 17521.00 Post GST rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Construction cost paid Input credit benefit@ 4% of construction of cost Input credit benefit@ 4% of construction cost 4.00% Input GST credit to be refunded to you is 4% of construction cost on amount paid 141216.00 5648.64 5648.64 Total GST input benefit passed on Particulars Reference row Amount (in Rs.) By way of reduction in price/consideration. Already passed on :1=A 1 5885.40 By way of refund. To be refunded :2=B 2 5648.64 Total input GST credit passed on: 3=(A+B)=(1+2) 3 11534.04 Our cost befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed on to the recipients would be known once the project was fully completed, the profiteering, if any, had to be arrived at a given point of time in terms of Rule 129 (6) of the CGST Rules, 2017. Therefore, the ITC available to the Respondent and the amount received by him from the home buyers till 31.03.2019 had been taken for determining the profiteering. Further, the ITC that would be available in future had not been taken into account for calculation of profiteering. This concern of the Respondent has already been addressed in para 12 of his Report dated 30.08.2019. The Respondent has failed to establish that his claim of rate reduction in the post-GST regime was on account of additional benefit of ITC. It might be due to any reason like reduction in the cost of construction or any marketing condition etc. 20. That in the Report dated 30.08.2019, the increase in the ITC availed by the Respondent as a percentage of the total turnover in the post GST period has been quantified. To arrive at profiteering, he has computed the increase in availability of ITC for the period from 01.07.2017 to 31.03.2019, compared to the ITC available in the pre-GST period from 01.04.2016 to 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 Mayur Residency 155 14.11.2017 129.07 16820 2170957.4 Priyanka Srivastava 18 Mayur Residency 117 14.11.2017 129.07 16820 2170957.4 Guru Dutt 22 Mayur Residency 155 11.01.2019 113.53 16820 1909574.6 b) He has passed on the ITC benefit by way of refund vide account payee cheques to his customers as per the annexed Table-1. ii. That he has submitted copies of the agreements (Annexure-A) in support of his claim that he has reduced the price of construction from ₹ 17,521/- per sq. mt. to ₹ 16,820/- per sq. mt. after the introduction of GST. iii. That he has also submitted acknowledgements from the customers (Annexure-B) of their having received the ITC benefit as supplementary evidence. iv. That the documents produced by him were bilat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed on 4% GST input by reduction of rates by 4% of basic rate after post GST regime 5885.40 Benefit Already passed on 5885.40 B: input GST benefit by way of refund of input on post GST payment. Particulars Construction cost paid GST paid on basic rate @ paid 18% Total Amount Paid (Cost+GST) Payment made in post GST regime i.e. on or after 01/07/2017 (excluding security amount) 141216.00 25418.88 166634.88 Input GST benefit by refund of input on post GST payment made Particulars Construction cost paid Input credit benefit@ 4% of construction of cost Input credit benefit@ 4% of construction cost 4.00% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has been mentioned in the Table-G below:- Table-G (Amount in Rs.) S.No. Particulars Pre-GST Post- GST Period A April, 2016 to June, 2017 July, 2017 to March, 2019 1 Tax Rate B 6% 18% 2 Ratio of CENVAT credit/ Input Tax Credit to Turnover C 0.00% 11.97% Turnover As Per Table-B Above (%) 3 Increase in input tax credit availed post-GST (%) D=11.97% less 0.00% 11.97% Analysis of Increase in input tax credit: 4 Basic Price collected during July, 2017 to March, 2019 E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information:- a. Copies of the agreements (Annexure-1) made with the following buyers during March-2017 to June-2017 as follows:- S.No. Customer Name Date of Agreement House No. Area-In Sq.Mt. Rate/Sq.Mt. Amount-Rs. Annexure 1 Page No. Point No. 1. Shweta Singh 28/03/2017 109 112.84 17521 1977069.6 1 04 05 2. Geeta Gupta 15/05/2017 113 108.67 17521 1904007.1 3 04 06 3 Ram Harsh 18/06/2017 118 91.74 17521 1607376 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. That as per DGAP s Report, he was required to pass on 11.97% of gross receipts collected during the impugned period. He has annexed the chart depicting the quantum of 11.97% of gross receipts and also 4% amount passed by way of reduction in price and 4% by way of cheque. c. That the balance amount of profiteering payable by him to his customers was ₹ 6,35,065/-. d. That while calculating the profiteering, the DGAP has used the term Recalibrated Price which was 88.03% (100%-11.97%) of the gross receipts. The DGAP has not considered reduction in the price while calculating the Recalibrated price from ₹ 17,521/- per sq. mt. to ₹ 16,820/- per sq. mt. which was approximately 4.17% of the rate. According to him, the recalibrated price should be ₹ 2,32,88,278/- as per the Table- H below:- Table-H (Amount in Rs.) Ref Col of Chart-A Attached Post-GST July,2017 To March,2019 Tax Rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was liable to pass on to his buyers? 2) Whether any violation of the provisions of Section 171 of the CGST Act, 2017 has been committed by the Respondent? 3) If yes then what was the quantum of profiteering? 25. Perusal of Section 171 (1) of the CGST Act shows that it provides as under:- 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. 26. It is clear from the plain reading of Section 171 (1) mentioned above that it pertains to the passing on the benefit of reduction in the rate of tax and that of benefit of ITC. On the issue of reduction in the rate of tax, it is apparent from the DGAP s Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be determined is as to whether there was any additional benefit of ITC with the introduction of GST which has accrued to the Respondent which he was required to pass on to his buyers. It has also been revealed from the DGAP s Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiteering was computed @ ₹ 19,623/- per sq. mt. the excess realisation or the profiteered amount would be Rs. (-) 8,11,433/- as per Table-C furnished by him. However, the above contention of the Respondent is untenable as the benefit of ITC cannot be calculated on the basis of the rate of cost of construction. Further, this rate was neither charged by the Respondent nor was required to be taken in to account while computing the profiteered amount as the same is to be calculated on the basis of the additional benefit of ITC which has accrued to the Respondent in the post GST period which is further required to be passed on to the buyers proportionate to the amount paid by each of them. Therefore, the above computation of the profiteered amount made by the Respondent is incorrect and hence, the same cannot be accepted. 29. The Respondent has further claimed vide Table-D supra that the profiteered amount was ₹ 24,94,839.75 out of which he had passed on ₹ 10,61,479/- by reducing the rate on the cost of construction by ₹ 701/- per sq. mt. and had passed on ₹ 10,18,773/- by way of cash reimbursement or through bank transfers and hence, he was required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by ₹ 701/- per sq. mt. or by 4%. However, perusal of the allotment letters/agreements issued to SISh. Prashant Gupta, Rajesh Kumar Singh, Shrishyam, Mrs. Shalini Mishra, Mrs. Priyanka Srivastava and Sh. Gurudutt (Annexure-A of Table-1) shows that no mention has been made in them to the effect that the rate of construction was being reduced to ₹ 16,820/- per sq. mt. due to passing on the benefit of ITC. Therefore, the claim made by the Respondent in this regard is not tenable and hence the same cannot be accepted. 32. The Respondent has also stated that he has passed on the ITC benefit of ₹ 8,47,441/- by way of reduction in the rate of construction and ₹ 8,10,884/- by way of refund vide account payee cheques to his 16 customers as per the Annexure-13 of Table-1. He has also submitted acknowledgements from the customers (Annexure-B) of having received the ITC benefit as supplementary evidence. However, as has been mentioned above the claim made by the Respondent that he has passed on the benefit of ITC by reducing the rate of construction has not been found to be correct and hence the above claim of the Respondent cannot be accepted. As far as the contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of reduction in the rate of construction and ₹ 10,72,292/- by way of repayment/refund and therefore, profiteered amount of ₹ 6,35,065/- was still payable by him to the recipients. It is apparent from the above submissions of the Respondent that as per his own calculations, he has computed different amounts of the benefit of ITC or the profiteered amount which he is required to pass on to his recipients. The Respondent has not followed a uniform mathematical methodology to calculate the benefit of ITC. Therefore, the calculations and the methodology adopted by the Respondent cannot be accepted as reliable, accurate and correct. Accordingly, the claims of the Respondent that he has passed on benefit of ITC by way of reduction in prices and by way of refund, are fallacious and hence the same cannot be accepted. 35. The Respondent vide his submissions dated 25.10.2019 has also stated that as per his calculations, the amount of ITC benefit to be passed on to the Applicant No. 1 was ₹ 11,534/- instead of ₹ 19,953/- as has been computed vide Annexure-12 of the DGAP s Report. Vide his above submissions the Respondent has further claimed that as per his calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible recipients/buyers in future. The profiteered amount along with applicable 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. 37. This Authority as per Rule 136 of the CGST Rules 2017 directs the jurisdictional Commissioner of CGST/SGST Uttar Pradesh to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is passed on to all the eligible customers/buyers. A report in compliance of this order shall be submitted to this Authority by the concerned Commissioner CGST (SGST within a period of 4 months from the date of receipt of this. 38. It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project Mayur Residency Extension in contravention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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