TMI Blog2022 (8) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... he profiteered amount @ 0.46% of the taxable amount (base price) and GST @ 8% / 12% on the said profiteered amount from the 394 flat buyers other than the Applicant No. 1. The Authority determines that, the Respondent has profiteered an amount of Rs. 49,26,054/- inclusive of GST @ 8% / 12% as calculated in the aforesaid Report dated 31.08.2020 for the stated period. Hence, the Authority holds that the Respondent is required to pass on the benefit of ITC along with the interest @ 18% per annum from the dates from which the above amount was collected by him from them till the payment is made as prescribed under Rule 133 (3)(b) of the CGST Rules, 2017, within a period of 3 months from the date of this Order as per the details mentioned in Annexure-A to this Order. - this Authority under Rule 133 (1) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats of the above Project commensurate with the benefit of ITC received by him. The present investigation has been conducted up to 31.12.2018 only. However, the Respondent has not obtained the Completion Certificate (CC) till that date. Therefore, he is liable to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entary evidence furnished by him during the course of the present proceedings? (ii) In case the Respondent has passed on the ITC benefit then what is the amount of the benefit passed on? (iii) What is the amount of ITC the benefit of which is required to be passed on by the Respondent to his recipients after correctly considering the figures of Cenvat credit? (iv) What is the amount of turnover to be taken into account during the period from 01.07.2017 to 31.12.2018? (v) What is the profiteered amount arid entitlement of benefit of ITC to be passed on to each eligible home-buyer including the Applicant No. 1? The brief facts of the present case are that an application dated 09.08.2018 was fi led before the Maharashtra State Screening Committee by the Applicant No. 1 under Rule 128 of the CGST Rules 2017 alleging profiteering by the Respondent in respect of purchase of a flat, T4-1004 OAK, in Tower-4 of the Respondent's project Runwal Forests near Mangatram Petrol Pump, LBS Marg, Kanjurmarg (W), Mumbai-400078. The Applicant No. 1 had alleged that the Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 133 (4) of the CGST Rules 2017, vide Interim Order No. 01/2020 dated 01.01.2020 to the DGAP directing him to reinvestigate on the issues mentioned in paragraph-1. 8. Accordingly the DGAP had submitted his instant Report dated 31.08.2020 to this Authority, wherein, the DGAP, has inter alia, stated that:- (I) On receipt of the aforesaid order from this Authority on 03.01.2020, the information/documents submitted by the Respondent were re-examined and cross-verified with the Report dated 26.06.2019 submitted by him before this Authority. He further stated that at the time of submission of above mentioned Investigation Report dated 26.06.2019, the Respondent had submitted the requisite information and data for the period covered under investigation. Since no direction to extend the period of investigation was given, hence the same set of data was sufficient for current re-investigation, The Respondent's submissions made before this Authority during hearings had been duly incorporated while examining the points raised by this Authority in its aforesaid 1.0. dated 01.01.2020. The DGAP also stated that all the issues raised by this Authority in pare 37 of aforesaid I.O. hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had overlooked the fact that in case of most flats booked after 01.07.2017, the original agreement value had already been reduced by way of discount and GST was charged on reduced agreement value. The Respondent claimed that for units booked post 01.07.2017 across both categories of units, upfront discounts up to 5.8% on the original agreement value have been passed at the time of sale, by way of reduction in the original agreement value and GST was charged on the reduced agreement value only. The Respondent also averred that he had already passed on discount to his customers who had booked units post-GST totalling Rs. 7,48,06,433/- (vide submission dated 08.08.2019) and no further discount was required to be passed on to these customers on progress billings, In case of most of the flats sold after 01.07.2017, the original agreement value has already been reduced by way of discount and GST was demanded on reduced agreement value. The Respondent had submitted copies of cost sheets of flats sold after 01.07.2017 during the course of hearing as documentary evidence to establish his point. (ii) that the documents submitted by the Respondent have been re-examined in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p to 5.8% on the original agreement value was passed on at the time of booking itself by way of reduction in the value to reduce the impact of increase in cost owing to increase in the rate of tax from 5.5% (4.5% Service Tax + 1% MVAT) in the pre-GST regime to 12% on account of introduction of GST. Accordingly, the original agreement values have already been reduced by giving discount and GST on applicable rate was demanded from the customers on the reduced agreement value. The increase in tax rate from 5.5% to 12% resulted in higher cost incidence for customers. The DGAP has submitted that the Respondent contended that the incremental tax burden was absorbed by him by offering discount up to 5.8% in the beginning itself as anti-profiteering discount subject to the condition that after this discount was provided there will be no further liability to provide any discount under section 171 of the CGST Act 2017. The additional benefit of Input Tax Credit arising due to implementation of GST could only be ascertained and quantified at the end of completion of construction as neither sales nor purchases were evenly spread. Also, milestones of billing to existing customers and rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence upon the recipients was 5.5% (4.5% Service Tax +1% MVAT) in pre-GST period, which increased to 12% in post-GST era, Further, the Respondent contended that as the exact quantum of ITC benefit that would accrue to him over the period was not available, he had chosen to absorb the incremental tax impact by passing upfront discount to the tune of approximate incremental tax so that there is no cost escalation on account of increased tax rates for home-buyers. The DGAP has stated that though, the Respondent's reasoning behind offering such approximate discount to the new home-buyers in absence of knowledge of exact quantum of ITC appeared to be logical, it was pertinent to mention that the quantum of benefits so offered by the Respondent to the home-buyers has varied. It is 6.5% (12% - 5.5%) for the normal home-buyers, and in case of affordable houses, wherein effective GST rate was reduced w.e.f. 25.01.2018 from 12% to 8%, the discount offered varies in the range 2.5-3% (8%- 5.5%), for units hooked after rate reduction. (vi) that the agreement value of flats sold post implementation of GST, has been looked into to find out if there was an actual decrease in the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,927,500 4/28/2017 T6-2101 661 13,704,638 9/11/2017 T6-2001 661 14,531,650 6/24/2017 T6-2503 661 13,309,015 8/11/2017 T6-2502 661 16,187,500 4/10/2017 T7-2302 771 15,441,685 8/4/2017 T7-2202 771 11,768,750 5/30/2017 Now, task at hand was to determine if the benefits so extended were real, and commensurate with the benefit of input Tax Credit. The DGAP has stated that the Respondent had submitted cost sheets in support of his claim that the benefit of GST was passed on to the home-buyers, and at least one home-buyer has confirmed the claim of the Respondent therefore, relying on the documentary evidence of cost sheets, comparison of rates of similar units as mentioned above in Table 'A', copies of agreement w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tegory) who had booked their units post-GST implementation, by way of upfront discounts on account of GST. Further the DGAP has also observed that for a total of 87 home-buyers (54 in Affordable Category and 33 in Other than Affordable Category) who have booked units post-GST implementation, no benefit of ITC by way of upfront discount has been given. Also, details of benefits extended, if any, to the 308 home-buyers (172 in Affordable Category and 136 in Other than Affordable Category) who had booked their units prior to GST implementation, and demands have been raised post-GST, had been made available. Accordingly, for the purpose of determination of the ratio of input tax credit to the turnover, in the post-GST (July, 2017 to December, 2018) period, turnover along with the upfront discounts (i.e. without deducting such discount) from all 733 home-buyers have been taken in the Table C' below. (b) In reply to the query as mentioned at para 1 (ii) supra, the DGAP has stated that based upon the summary of benefits passed on by the Respondent through upfront reduction in agreement prices at the time of booking of flats post-GST implementation, in the period July, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 433,884 8. ITC Proportionate to Sold Area (H)=(C) or (D)*G/F 39,141,894 65,337,859 9. Ratio of CENVAT/VAT/Input Tax Credit to Turnover (I=H/E*100) 1.23% 1.69% (ii) that from the above Table- 'C', it transpires that the input tax credit as a percentage of the turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 1.23% and during the post-GST period (July, 2017 to December. 2018), it was 1.69%. This indicates that post-GST, the Respondent has apparently benefited from additional input tax credit to the tune of 0.46% [1.69%(-) 1.23%] of the turnover. (iii) that in this regard, reference may be taken of the Table 'C'. where the ratios of input tax credits to the turnovers, during the pre-GST (April, 201.6 to June, 2017) and post-GST (July, 2017 to December, 2018) periods, are furnished, wherein it was observed that benefit of only 0.46% has accrued to the Respondent, however, the upfront discounts offered to the new home-buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Pre-GST Post-GST 1. Period A April, 2016 to June, 2017 01.07.2017 to 31.12.2018 01.072017 to 24.01.2018 25.01.2018 to 31.12.2018 2. Output tax rate (%) B 5.50% 12.00% 12.00% 8.00% 3. Ratio of CENVAT/VAT/GST Input Tax Credit to Turnover as per Table B above (%) C 1.23% 1.69% 1.69% 1.69% 4. Increase in input tax credit availed post-GST (%) D - 0.46% 0.46% 0.46% 5. Analysis of Increase in input tax credit: 6. Total Basic Demand during July, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the basic prices as well as cum-tax prices for units booked prior to GST implementation and 87 units booked post-GST but with no benefit passed on. Therefore, in terms of Section 171 of the Central Goods and Services Tax Act, 2017, the benefit of the additional input tax credit should have been passed on by the Respondent to the recipients. In other words, by not reducing the pre-GST basic prices by 0.46% on account of additional benefit of input tax credit and charging GST @ 12% or 8% on the pre-GST basic prices, the Respondent appeared to have contravened the provisions of Section 171 of the Central Goods and Services Tax Act, 2017. (d) In reply to the query as mentioned at pars 1 (iv) supra, the DGAP has stated that total demand as raised from the home-buyers inclusive of the benefits offered through upfront discount has been taken for determination of exact quantum of additional benefit of Input Tax Credit. However, profiteering has been calculated only for those home-buyers who had booked units prior to implementation of GST and demands have been raised from them post GST implementation and 87 units booked post-GST but with no benefit passed on. Accordingly, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.03.2019 Rs. 10,059 180000959 21.08.2020 Anti-profiteering discount RV18/20/5000074 03.12.2019 Rs. 10,059 180000874 21.08.2020 Anti-profiteering discount RFTX/27/00452/11 07.06.2018 Rs. 10,394 (IV) The DGAP has further submitted that in view of the aforementioned Findings, it appeared that the provisions of Section 171 (I) of the Central Goods and Services Tax Act, 2017., requiring that any reduction in rate of tax on airy 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. 9. A Notice dated 07.09.2020 enclosing the DGAP's Report dated 31.08.2020 alongwith its annexures was issued to the Respondent directing him to explain why the above Report should not be accepted and his liability for profiteering should not be determined under section 171 of the CGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed discount provided on invoices raised during the investigation period amounted to Rs. 2,45,79.594/-. (v) that the balance 14 customers (total demand value Rs. 195,80,646) have cancelled their bookings and thus are not entitled to ITC benefits. Cancellation deeds/credit notes on cancellation for these customers were attached to his reply. (vi) that while the DGAP has claimed that he (the Respondent) had profiteered by Rs. 49,26,045/-, however if the ITC discounts passed to customers through credit notes were taken into account (amounting to Rs. 2,45,79,594/-) then he would have absorbed excess ITC discount of Rs. 1,96,53,549, this would mean that there was no profiteering by him and he had actually passed discount in excess of the rate at which he was required to pass ITC benefit to customers as per the DGAP's Report. He accordingly requested this Authority to take into account the discounts extended to customers by him through credit notes which would establish that there was no profiteering by him and that he had passed on ITC benefits in excess of the rate at which he was required to pass on discount as per DGAP. 11. On receipt of the above said submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,2020 has furnished his reply to the above said DGAP's clarification, whereby; (i) The DGAP has in Annexure-6 of his Report given a list of 394 customers to whom according to DGAP, discount benefits on account of Section 171 of CGST Act 2017 were not offered. He further argued that the DGAP in his Report has also remarked that he (the Respondent) had realised an excess amount of Rs. 3,763/- from the Applicant No. 1 in the present case and the DGAP has further acknowledged his submissions and Credit Notes issued to Applicant No. 1 totalling Rs. 47,277/- towards anti-profiteering discounts on invoices issued till March 2019. He also submitted that the Applicant No.1, through an undertaking signed by him has himself acknowledged receipt of discount of Rs. 1,17,056/- in full compliance by him of the provisions under Section 171 of the CGST Act 2017. He has also submitted the copies of the undertaking signed by the Applicant No. I and other customers. (ii) The Respondent reiterated his submissions dated 07.10.2020 wherein he had mentioned that out 395 customers to whom DGAP claimed that no discount benefits were given, ITC discount benefits were passed through Credit Notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his complaint filing. (ii) that in spite of reminders, the Respondent did not pass on the discounts during the period 03.10.2018 to 12.04.2019. He further stated that the Respondent has not given any interest on discount passed on and GST was collected @ 18% in advance. He claimed for interest for delayed ITC benefit passed on. He also stated that the Respondent had charged excess money and was not paying interest. (iii) that the undertaking in respect of ITC was taken from him under duress during possession else the Respondent was not giving possession letter of his flat, The Respondent did not allow him to mention under protest on this undertaking. (iv) that the Respondent had taken advance 1% MVAT on agreement value of Rs. 1,19,750/- on 25.08.2016 which was 100% on Agreement Value of Rs. 1,19,75,000/- but did not give any benefit to him, which vas double taxation on him. He claimed that the Respondent should refund 40% of Rs. 1,19,750/- of MVAT collected from him, 60% of agreement value invoices were raised pre GST era so 40% on Rs. 1,19750/- was double taxation. He claimed Rs. 47,900/- on this account. (v) that the discount passed on @ 2.50% at possession wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the other material placed on record. It was noticed that repeated information and clarification were asked for from the DGAP, Applicants and the Respondent. The Authority also finds that vide Interim Order 01/2020 dated 01.01.2020 , it had directed the DGAP to re-investigate the matter on certain issue. The said Order was not challenged for any legal remedy and as such, the Authority observes that the methodology adopted by DGAP has attained finality. The Authority finds that:- (i) The Applicant No. 1, vide his complaint dated 09.08.2018 had alleged that the Respondent was not passing on the benefit of ITC to him in respect of purchase of Flat no.T4-1004 OAK, in Tower-4 of the Respondent's Runwal Forests Project being executed by the Respondent in Mumbai, in spite of the fact that, he was availing ITC at the higher rates during the GST regime which had resulted in benefit of additional ITC to the Respondent and that the latter was also charging GST @18%. This complaint was examined by the Maharashtra State Screening Committee on Anti-Profiteering and referred to the Standing Committee on Anti-Profiteering. The Standing Committee on Anti-Profiteering had examined the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been given as upfront discount to 388 homebuyers to pass on the benefit of additional ETC, g. Hence total benefit accrued to the Respondent for the period from 01.07.2017 to 31.12.2018 is Rs. 3,71,38,60,019/- (387,58,27,122 - 16,19,67,103/-). h. Accordingly, for the purpose of determination of the ratio of input tax credit to the turnover, in the post-GST (July, 2017 to December, 2018) period, turnover (without deduction of the upfront discounts given to 338 homebuyers) from all such 733 home-buyers on whom demands have been raised during the period covered by this investigation/Order i.e. from 1.07.2017 to 31.12.2018 has been taken in the Table 'C' above. i. For the purpose of calculation of amount profiteered, demands raised from 308 home-buyers (172 AH + 136 OAH) who booked their units prior to GST implementation and on whom demands had been raised/payment received by the Respondent on or after 1.07.2017 plus demands raised from 87 home buyers (54 AH 33 OAH) who have booked their units post-GST but to them no ITC was passed on by way of upfront discounts, have been considered. j. For Affordable Housing category (172 + 54= 226) it is Rs. 47,48,81, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent for the above said periods and hence, the ratios calculated by the DGAP are based on the factual record submitted by the Respondent and hence they can be relied upon while computing the profiteered amount. The above methodology has been approved by this Authority in all the cases where benefit of ITC is required to be passed on. Therefore, the above methodology is appropriate, logical, reasonable and in consonance with the provisions of Section 171 of the CGST Act, 2017. (iv) The Applicant No. 1 vide his submissions dated 25.01.2021, has claimed that ITC was Zero on the invoices dated 07.06.2018, 03.12.2018, 14.03,2019 12.04.2019. He further stated that the Respondent has not given any interest on discount passed on now (GST was collected @ 18% in advance) whereas the Respondent vide his submissions dated 23.12.2020, has submitted copy of an undertaking signed by the Applicant No. 1 which acknowledged receipt of Rs. 1,17,056/- in full compliance by the Respondent of the provision made under section 171 of the CGST Act 2017. However, the Respondent has in his submissions to the DGAP submitted that, Credit Notes were issued by the Respondent to Applicant No. 1 total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of each such homebuyer by the DGAP in its Report dated 31.08,2020 and Annexure 6 thereof. The Authority finds that, in relation to 87 homebuyers who had booked their units/flats on or after 1,07.2017, the Respondent is Liable to return the amount of benefit as calculated in the case of each such homebuyer by the DGAP in its Report dated 31.08.2020 and Annexure 6 thereof as no upfront discount to pass on benefit of ITC was given to such number of homebuyers. (vi) Therefore, the Authority holds that the Respondent has not passed on the benefit of ITC to all the eligible home buyers under the provisions of section 171 of the CGST Act 2017. 21. The Authority finds that the additional benefit of ITC availed by the Respondent during the period July 2017 to December 2018 which is required to be passed on to his home buyers, has been correctly calculated by the DGAP which is based on the factual records/information furnished by the Respondent, and according to the Methodology which has been approved by this Authority in all the cases where benefit of ITC is required to be passed on under the provisions of Section 171 of the CGST Act, 2017. 22. In view of the above fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to file complaint against the Respondent before the Maharashtra State Screening Committee in case the remaining benefit of ITC is not passed on to them. 24. The Authority finds that vide Section 112 of the Finance Act, 2019 specific penalty provisions have been added for violation of the provisions of Section 171 (1) which have come in to force w.e.f. 01.01.2020, by inserting Section 171 (3A), Since, no penalty provisions were in existence between the period from 01.07.2017 to 31.12.1018 i.e. the period of the present investigation for which the profiteered amount has been calculated and the Respondent is found to have violated the provisions of Section 171 (1), the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent for profiteering done during such period. 25. This Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST/SGST, Maharashtra to monitor compliance of this Order, under the supervision of the DGAP, by ensuring that the amount profiteered by the Respondent, is passed along with interest @ 18% as prescribed, to all the eligible buyers as ordered by the Authority. In this regard an advertisement of appropriate si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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