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TMI Blog2020 (1) TMI 1578X X X X Extracts X X X X X X X X Extracts X X X X ..... had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by him by way of commensurate reduction in the price of the above flats. The aforesaid first application was considered by the Standing Committee on Anti-profiteering, in its meeting held on 13th December, 2018, wherein it was decided to forward the same to the DGAP to conduct detailed investigation in to the complaint according to Rule 129 (1) of the CGST Rules, 2017. The second application was considered by the Standing Committee on Anti-profiteering, in its meeting held on 11 th March, 2018, wherein it was also decided to forward the same to the DGAP to conduct detailed investigation. 2. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP had issued Notice dated 15.01.2019 under Rule 129 (3) of the above Rules, asking the Respondent to intimate as to whether he admitted that the benefit of ITC had not been passed on to the above Applicant by way of commensurate reduction in the price of the flat and in case it was so, to suo-moto compute the quantum of the same and mention it in his reply to the Notice along with the supporting documents. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balance Sheet for FY 2016-17 & 2017-18. (f) Copy of Electronic Credit Ledger for the period 01.07.2017 to 31.12.2018. (g) CENVAT/lnput Tax Credit register for the FY 2016-17 and 2017-18 and April, 2018 to December, 2018. (h) Details of VAT, Service Tax, ITC of VAT, CENVAT Credit for the period April, 2016 to June, 2017, for the project "Paradise" List of home buyers in the project "Paradise" alongwith details of benefit passed on. (j) Copy of RERA Registration Certificate of the Project "Paradise". (k) Copy of Tran-1. 7. The DGAP has also stated that all the documents placed on record were carefully examined by him and he had found that the main issues for determination were whether there was reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and in case it was so, whether the Respondent had passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act, 2017 or not. 8. The DGAP has further stated that the Respondent, vide his letter dated 29.01.2019 had submitted that he had informed the above Applicants from time to time th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Goods and Services Tax Act, 2017, defining 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 Il, sale of building". Further, Clause (b) of para 5 of Schedule Il of the Central Goods and Services Tax Act, 2017 reads "(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". In the light of these provisions, the DGAP has contended that the ITC pertaining to the units which were under construction but not sold was provisional ITC that may be required to be reversed by the Respondent, if such units would remain unsold at the time of issue of CC, in terms of Section 17 (2) & Section 17 (3) of the Central Goods and Services Tax Act, 2017 which read as under:- 17 (2) Where the goods or services or both are used by the registered person partly for effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 0.43% and during the post-GST period (July, 2017 to December, 2018), it was 3.10% which clearly confirmed that post-GST, the Respondent has been benefited from additional ITC to the tune of 2.67% [3.10% (-) 0.43%] of the turnover. 13. The DGAP has further submitted that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land 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 houses upto a carpet area of 60 square metres per house was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. In view of the change in the GST rate after 01.07.2017, the issue of profiteering has been examined by the DGAP in two parts, i.e., by comparing the applicable tax rate and input tax credit available in the pre-GST period (April, 2016 to June, 2017) when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility pre and post GST and the details of the amount collected by the Respondent from the Applicant and other home buyers during the period from 01.07.2017 to 24.01.2018, the amount of benefit of ITC not passed on or in other words, the profiteered amount has been quantified by the DGAP as Rs. which included CST @ 12%, on the base profited amount of Rs. 57,63,746/-. Further, the amount of benefit of input tax credit that needed to be passed on by the Respondent to the home buyers during the period 25.01.2018 to 31.12.2018 has been computed as Rs. 1,19,91,137/- which included 8% GST on the base amount of Rs. 11,102,905/-. In respect of the commercial shops sold by the Respondent during the period 01.07.2017 to 31.12.2018, the benefit of input tax credit that needed to be passed on by the Respondent to the buyers of commercial shops came to Rs. 11,39,897/- which included 12% GST on the base amount of Rs. 10,17,765/-. Therefore, the total benefit of input tax credit that the Respondent was required to pass on during the period 01.07.2017 to 31.12.2018 in respect of both residential flats as well as commercial shops, came to Rs. 1,95,86,429/- which included GST (@ as applicable) on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve table), by an amount of Rs. 10,24,778/-. The details of these amounts were given in Annexure-18 & 19 of the DGAP's Report. Further, the benefit claimed to have been passed on by the Respondent was higher than what he should have passed on, in respect of one of the already sold commercial shops (Sr. 4 of above Table), by an amount of Rs. 19,987/-. The details of this excess benefit claimed to have been passed on were given in Annexure-20 of the DGAP's Report. However, this excess benefit claimed to have been passed on to some recipients, could not be set off against the additional benefit required to be passed on to some other recipients as per Annexure-18 & 19 of the DGAP's Report and it could only be adjusted against any future benefit that might accrue to such recipients who had received excess benefit. 18. The DGAP has further mentioned that the above computation of profiteering was with respect to 740 home buyers and 23 commercial shop buyers, whereas the Respondent had booked 740 residential units and 27 commercial shops till 31.12.2018. Out of the 27 commercial shops booked till 31.12.2018, in respect of 4 shops, though the booking amount was received in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that would be available to the Respondent in future could not be determined at the stage, when the construction of the project was yet to be completed. He has further stated that the provisions of Section 171 (1) of the Central Goods and Services Tax Act, 2017 requiring that "a 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", have been contravened by the Respondent in the present case. 21. The above Report was considered by the Authority in its meeting held on 09.07.2019 and it was decided that the Applicants and the Respondent be asked to appear before the Authority on 05.08.2019. The Respondent was issued notice on 10.07.2019 to explain why the above Report of the DGAP should not be accepted and his liability for violating the provisions of Section 171 of the CGST Act, 2017 should not be fixed. During the course of the hearings no one appeared for the Applicants and the Respondent was represented by Sh. Suresh Kumar, Company Representative and Sh. Narottam Rawat, CA. 22. Vide order dated 05.08.2019, The Authority directed the Respondent to submit the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of other projects which were on-going as on 1st July, 2017 as under:- Sr. No. Project Name ITC Benefit claimed to have passed on till 30.08.2019 (Amount in Lacs) Residential Commercial TOTAL 1 Sector-70 23.72 NIL 23.72 2 Sector-84 179.30 14.84 194.14 3 Sector-99 108.59 18.34 126.92 25. The Respondent has also submitted that the Report furnished by the DGAP dated 19.06.2019, was acceptable to him and ITC benefit determined as per the report would be passed on to all the home buyers. 26. The Respondent has further submitted that he had not availed any ITC on closing stock of raw material as on 30.06.2017, therefore, he was not required to submit any TRAN-2 Return. He further stated that he had reversed the ITC in respect of non-taxable turnover. 27. The Respondent has further submitted that due to newly implemented law and frequent changes at initial stage he was unable to determine exact amount to be passed to the home buyers and to avoid the delay he had passed an interim amount to the home buyers in the month of March-2019 through Credit notes, further after receiving the report from the DGAP he had again passed another instalment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.43%) of his total turnover during the post-GST period which he was required to pass on to the flat buyers of his project. The DGAP has also found that the Respondent had not reduced the basic prices of his flats by 2.67% on the account of benefit from ITC although he had been charging his home buyers, GST at th increased rate of 12% on the pre-GST basic price. The DGAP has also reported that the Respondent has thus contravened the provisions of Section 171 of the CGST Act, 2017. The DGAP has also reported that the amount of benefit of ITC which has not been passed on by the Respondent, i.e. the aggregate profiteered amount, came to Rs. 1 including the GST applicable on the basic profiteered amount of Rs. 1,78,84,716/-. The DGAP has also reported that the above aggregate amount of profiteering also included the profiteered amount of Rs. 25,282/- (inclusive of GST as applicable) for each of the Applicant No. 1 and 2. 30. It is clear to us from the perusal of the above facts that the Respondent has indeed benefited on account of ITC to the extent of 2.67% of his turnover during the post-GST period, i.e. from July, 2017 to December, 2018 and hence the provisions of Section 171 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of Rule 133 (4) of the above Rules and submit his Report clearly mentioning the verified amount of benefit passed on by the Respondent to his home buyers and the balance amount still to be passed on to each of the home buyers within a period of two months of this Order. 32. We also observe that the Respondent, vide his submissions dated 16.04.2019, has himself admitted that he has three more projects under execution as on 1st July, 2017 details of which have been submitted by him as follows:- Sr. No. Project Name ITC Benefit claimed to have passed on till 30.08.2019 (Amount in Lacs) Residential Commercial TOTAL 1 Sector-70 23.72 NIL 23.72 2 Sector-84 179.30 14.84 194.14 3 Sector-99 108.59 18.34 126.92 Keeping in view the self-admission of the Respondent in which he has stated that he is liable to pass on the benefit of additional ITC as per the provisions of Section 171 of the above Act, there is reasonable ground to believe that the Respondent is required to pass on the benefit of additional ITC to the eligible house buyers in respect of the above projects. Accordingly, the DGAP is also directed to investigate the issue of passing on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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