TMI Blog2020 (11) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... only been mandated to ensure that both the benefits of tax rate reduction and ITC are passed on to the customers. Therefore, this Authority has no mandate to look into the matter whether the Respondent has wrongly charged GST from the Applicants. In respect of the Blossom County' project the CENVAT credit/ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was 0.71% and during the post-GST period this ratio was 0.85% as per the Table-C mentioned above. Therefore, the Respondent has benefited from the additional ITC to the tune of 10.25% (10.25% - 0%) of the total turnover in respect of the above Phase which he was required to pass on to the flat buyers of the above Phase. It has also found that the Respondent has not reduced the basic price of his flats by 0.14% in case of the above Project due to additional benefit of ITC resulting in contravention of the provisions of Section 171 of the CGST Act, 2017. It is also evident that the amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount came to ₹ 13,32,278/- which included 12% GST on the basic profiteered amount. This amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1 had filed application before the Uttar Pradesh State Screening Committee on Anti-profiteering under Rule 128 of the CGST Rules, 2017 and alleged that the Respondent had not passed on the benefit of the input tax credit by way of commensurate reduction in price to the Applicant in respect of the purchase of flat No. 804, in Tower J in the Respondent project Logix Blossom County , Sector-137, Noida-Greater Noida Expressway, Uttar Pradesh. The Uttar Pradesh State Screening Committee on prima facie having satisfied itself that the Respondent had not passed on the benefit of ITC had forwarded the application of Applicant No. 1 with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 (1) of the above Rule, which was examined by the Standing Committee on Anti-profiteering in its meeting held on 06.09.2018 whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. 2. Another application filed by the Applicant No. 2 against the Respondent was also forwarded by the Standing Committee on Anti-profiteering, vide minutes of its meetings held on 13.12.2018 to the DGAP for detailed inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. The same view would apply to the input tax credit of GST earned post-GST implementation w.e.f. 01.07.2017, as this pertained to the inputs and input services used for the under-construction units. d. The Respondent also submitted that he had not taken any credit of VAT in the pre-GST regime. e. A total number of 2381 units spread across 17 towers on an area of 35,63,342 sq. ft., were being constructed in the Project Blossom County', out of which Completion Certificates had been received for a total of 1454 units spread across 10 towers on an area of 20,90,333 sq. ft. The remaining 927 units in 7 towers, covering total area of 14,73,009 sq. ft., were still under construction. 6. The DGAP in his Report has further stated that the Respondent had claimed that the benefit of accumulated CENVAT credit (input tax credit) could not have been transferred to the units in respect of which the Completion Certificates had been issued before the introduction of GST, since the accumulated balance of CENVAT credit, as on 30.06.2017, was the CENVAT credit on the input services procured in respect of the units that were still under construction as on 30,06.2017 and the same ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 36000 Total 5381498 8. The DGAP has further reported that the contention of the Respondent that even though Completion Certificates were obtained for the two phases in the pre-GST period itself, the applicable GST was charged from the homebuyers along with the last demand raised by him, since the possession of the flats in the towers was handed over by him only in the post-GST period (January 2018) and hence the incidence of the tax was higher on the home-buyers. 9. The DGAP further reported that the benefit of additional input tax credit that accrued on account of GST, if not passed on to the recipients, amounted to profiteering which has to be determined at a given point of time in terms of Rule 129(6) of the Rules. Therefore, the additional input tax credit available to the Respondent and the amounts received by him from the above Applicants and other recipients, in the pre and post GST periods, have to be taken into account to determine the benefit of input tax credit that is required to be passed on by the Respondent to his buyers. 10. The DGAP also reported that before 01.07.2017, i.e. b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ril 2018 to Sep 2018 Total (Pre-GST) (Post-GST) 1 2 3 4 (5)=(3)+(4) 6 7 (8)=(6)+(7) 1. CENVAT of Service Tax Paid on Input Services (A) 2,80,55,843 80,57,715 3,61,13,558 - - - 2. Credit of VAT Paid on Purchase of Inputs (B) 0 0 0 - - - 4. Input Tax Credit of GST Availed (C) - - - 3,45,86,602 1,88,97,474 5,34,84,076 5. Total CENVATNAT/Input Tax Credit Available (D)=(A)+(B) or (C) 2,80,55,843 80,57,715 3,61,13,558 3,45,86,602 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June, 2017 July 2017 to Sep 2018 2. Output tax rate (%) B 4.50% 12.00% 3. The ratio of CENVAT/ Input Tax Credit to Total Turnover as per Table- E above (%) C 0.71% 0.85% 4. Increase in input tax credit availed post-GST (%) D - 0.14% 5. Analysis of Increase in input tax credit: 6. Total Basic cost Demand raised from July 2017 to September 2018 as per home-buyers data E 84,96,67,010 7. GST charged F=E*12% 10,19,60,041 8. Total demanded G 95,16,27,051 9. Recalibrated Base Price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .05.2019 and 28.05.2019. The hearing was attended by Sh. Amit Kumar Agarwal, CA and Sh. Abhinav Kalra, CA on behalf of the Respondent, Sh. Rajender Meena Applicant No. 1, Sh. Chandan Singh Applicant No. 2 and Sh. Shivendu Pandey, Superintendent, DGAP for Applicant No. 3. During the course of the hearings, the Respondent filed his written submissions on 06.06.2019 vide which he submitted that being a law-abiding company he accepted the profiteering of ₹ 13,32,278/- as per the DGAP's report and did want to litigate the matter further and was ready to pass on the said amount to his homebuyers in line with the DGAP's report. He also submitted the following:- a. Working sheet evidencing that each of the home buyers had been passed on the benefit by way of issue of credit notes. b. Copy of the GST registration certificate. c. Copies of Service Tax and GST returns from December 2016 to March 2019. d. He further stated that as per the builder buyer agreement last instalment was due at the time of possession; that he had received the completion certificate for phase II of the project comprising 5 towers (I/J/0/P/Q) in January 2017; that even after receiving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d amount. The DGAP's Report in Para 18 has mentioned that there was a mismatch in the total demand made from the customers as per the home-buyers list and its reconciliation with the turnover reported in the GSTR-3B and ST-3 returns, which needed to be reinvestigated and confirmed. (ii) The turnover from the home buyers list submitted before the DGAP by the Respondent is much greater than the corresponding turnover reflected in the statutory returns filed by the Respondent himself. Thus, the area sold relevant to turnover worked out based on the home buyer list as mentioned in Table-C of the DGAP report is required to be reinvestigated. (iii) The Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate 12% given 1/3 rd 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 affordable and low-cost housing was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018 w.e.f. 25.01.2018. However, the same was not been reflected correctly in the GSTR-3B returns, and accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of services. The DGAP has further stated that In terms of Section 13 (2) of the Act, the definition of the 'time of supply of services' included components such as Advances Received and that the tax liability was required to be discharged on the amounts received as advances in addition to turnover received from payments made by the homebuyers. The DGAP has nevertheless added that since there was a mismatch between the demand made from the home-buyers and the turnover reported by the Respondent in his statutory GSTR-1 and GSTR-3B returns, the Respondent was asked to submit proper reconciliation of the same. The Respondent vide his email dated 14.02.2020 (Annex-5), submitted reconciliation of the turnover of the Respondent reported by him in his statutory returns and the aggregate of the demands raised by him from his home-buyers. Further, the Respondent has also provided details of actual B2C invoice value and actual advances received which has been incorporated in his revised GSTR-1 Returns. As such the total turnover in GSTR-3B of the Respondent was ₹ 89,04,58,155/-, while in his GSTR-1 Returns it was ₹ 89,04,58,423/-, and thus there was a nominal misma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned in the report was correct. c. In reply to the para that the effective 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 w.e.f. 25.01.2018, however, the same has not been reflected correctly in the GSTR-3B returns, and accordingly, this aspect was also required to be further investigated, the DGAP has reported that as has been stated by this Authority, the effective GST rate on construction service in respect of affordable and low-cost housing was reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018 w.e.f. 25.01.2018, however, as the impugned project under consideration was not an affordable housing project, this rate reduction had no bearing whatsoever in this matter. 21. The DGAP has further reported that the amount of profiteering by the Respondent on account of contravention of provisions of Section 171 of the CGST Act, 2017 for the period covered was correctly estimated as ₹ 13,32,278/-. 22. The DGAP has concluded that as has been mentioned in the report dated 03.04.2019, the benefit of addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be accepted and his liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. 24. Personal hearings were given to the parties on 25.03.2020, 20.04.2020, and 13.05.2020. However, due to the Covid-19 pandemic, the scheduled hearings could not be held on the above dates. Therefore, the Respondent and the Applicant No. 1 and 2 were further directed to file their consolidated written submissions. The Respondent vide his submissions dated 05.06.2020 has stated that:- a. He had accepted his liability against the profiteered amount as has been calculated by the DGAP and would not like to litigate the matter further. b. That he had already passed on the benefit of ITC amounting to ₹ 13,32,278/- to his customers/flat buyers by way of credit notes and accordingly reducing the demands raised by him on his customers. c. That he had submitted the ledger of credit passed in respect of the flat/home buyers whom such credit had been passed and had submitted the sample copies of the credit notes in compliance vide his reply dated 06.06.2019. d. That he did not want to be heard in person and requested to take up the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Accordingly, the DGAP had investigated all the complaints together and submitted his Report under Rule 129 (6) of the CGST Rules, 2017. The present investigation pertains to the period from 01.07.2017 to 30.09.2018. 29. We take note of the fact that Respondent vide his submissions dated 05.06.2020 has accepted his liability of passing on the benefit of additional ITC as per the report of the DGAP and has also submitted that he had passed on the benefit of ₹ 13,32,278/- to his customers/flat buyers by way of credit notes and by way of reducing the instalments to be paid by his homebuyers against the demands pending from them and the proof of the same has also been submitted before the DGAP. This claim of the Respondent has been accepted as verified by the DGAP vide his supplementary report dated 20.07.2020. We observe that the DGAP has verified the detail of the ITC passed on by the Respondent to his homebuyers/ recipients (355 home buyers) from the ledger account, Credit Notes (20) and Annexure-17 of the DGAP's report. 30. We also observe that the Applicant No. 1 2 have stated that they had booked their flats with the builder on 31.10.2013 and as per the builde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the profiteered amount as ₹ 13,32,278/- as per the provisions of Section 171 (1) read with Rule 133 (1) of the above Rules which includes GST @ 12% on the base profiteered amount of ₹ 11,89,534/-. The profiteered amount in respect of the Applicant No. 1 2 is held to be ₹ 3,880/- and ₹ 3,929/- respectively. The Respondent has claimed that he had passed on the benefit to his homebuyers and the above claim of the Respondent has been verified by the DGAP vide his supplementary report dated 20.07.2020. The DGAP has reported that the Respondent had submitted the ledger account in respect of 355 home buyers and credit notes (20) on a sample basis wherein the details of the benefit of ITC passed on to the recipients (355 home buyers) have been mentioned and that the details of the ITC passed on to the recipients (355 home buyers) have been verified from the ledger account and the credit notes against Annexure-17 of the report of the DGAP dated 03.04.2019, and the same were found to be in order. However, the Applicant No. 1 2 have not submitted acknowledgement of having received the benefit. Therefore, the concerned jurisdictional Commissioner is directed to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cannot be imposed on the Respondent retrospectively. Accordingly, Show Cause Notice directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him is not required to be issued. 37. The DGAP in his report dated 03.04.2019 has reported that in the project 'Blossom County', there were 2381 total number of units spread across 17 towers, out of which Completion Certificate had been received for a total of 1454 units spread across 10 towers. The remaining 927 units in 7 towers were under construction. Keeping in view the above findings of the DGAP there are sufficient reasons to believe that there is need to examine whether the Respondent has passed on the benefit of ITC to the buyers of the remaining 7 towers or not. Therefore, this Authority, in terms of the provisions of Section 171 (2) of the CGST Act, 2017 directs the DGAP to further investigate the above 7 towers of the project of the Respondent for violation of the provisions of Section 171 of the CGST Act 2017 and to submit his Report to this Authority in terms of Section 171 (2) of CGST Act 2017. 38. As pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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