TMI Blog2022 (8) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... ers/customers i.e. those who have booked their units prior to 1,07.2017 (excluding those from whom no demand was raised/ consideration received from L07.2017 to 31.12.2018) for the Project Himalaya Pride . The Authority finds that the Respondent has profiteered by an amount of Rs. 2,26,76,700/- during the period of investigation i.e. 01.07.2017 to 31.12.2018. The above amount that has been profiteered by the Respondent from his home buyers shall be refunded by him, along with interest 018% thereon, from the date when the above amount was profiteered by him till the date of such payment, in line with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. Interest - HELD THAT:- 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 Units commensurate with the benefit of ITC received by him - The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 2,26,76,700/-. Hence the Respondent is directed to also pass on interest @ 18% to the homebuyers/customers on the entire amount profiteered, starting from the date from which the above am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t new customer was correct or not? c. whether the Respondent had passed on the benefit of ITC of GST of Rs. 2,94,078/- to the Applicant No.1 d. Whether the Respondent had given an amount of Rs. 3,41,963/- as the discount in addition to reduction in GST rate of 7.5% to the Applicant No. 1? e. Whether the above amounts claimed to have been passed on by the Respondent are in line with the provisions of Section 171 of the CGST Act? f. after carefully considering above issues, exact amount of profiteering which is to be passed on by the Respondent to every homebuyers/customers? 2. The brief facts of the case are that the Applicant No. 1 had filed an application dated 16.10.2018 before the Haryana State Screening Committee on Anti-profiteering, under Rule 128 of the CGST Rules, 2017 in respect of purchase of a Flat in the Respondent's project Himalaya Pride situated at Plot No. 10-B, Techzone-IV, Greater Noida (West), UP-201306 and had alleged that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017. The Haryana State Screening Committee on Anti-profiteering on be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 26,09,2018, issued in favour of the Applicant No. 1, executed on a non-judicial stamp paper, wherein it was explicitly mentioned that the Applicant No. 1 had to pay only the basic consideration for the flat which was Rs. 40,96,800/- and the applicable GST would be borne by the Respondent. The Respondent did not claim confidentiality of any details/ information furnished by him, in terms of Rule 130 of the CGST Rules, 2017. e. The DGAP further stated that though the Respondent had mentioned that he had passed on the benefit of ITC to the home-buyers, he failed to provide any documentary evidence of such discounts offered to the individual home-buyers except the allotment letter dated 26.09.2018 issued to the Applicant No. 1, wherein it was mentioned that all GST liability would be borne by the Respondent as discount and the Applicant No. 1 would have to pay only the basic consideration of Rs. 40,96,800/-. f. The DGAP further observed that prior to 01.07.2017, i.e., before GST was introduced, the Respondent was eligible to avail CENVAT credit of Service Tax paid on the input services. However, CENVAT credit of Central Excise Duty paid on the inputs was not admissible as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old upto 31.12.2018) (E) 802,322,679 893,185,597 6. Total Saleable Area (in sq. ft.) (F) 1,473,354 1,473,354 7. Area Sold relevant to Turnover (G) 401,307 877,525 8. ITC relevant to area sold (H)= (C) or (D)*G/F 8,059,732 85,011,068 9. Ratio of CENVAT/ Input Tax Credit to Turnover (I)= (H/E*100) 1.00% 9.52% g. The DGAP thus stated that from the above table, it was clear that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 1.00% and during the post-GST period (July, 2017 to December, 2018), it was 9.52% which indicated that post-GST, the Respondent had apparently benefited from additional ITC to the tune of 8.52% [9.52% (-) 1.00%] of the turnover. h. The DGAP also observed that the Central Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Base Price H=E*(1-D) or 91.48% of E 817,086,184 10. GST @12% I=H*12% 98,050,342 11. Commensurate demand price J=H+I 915,136,526 12. Excess Collection of Demand or Profiteered Amount K=G-J 85,231,342 i. Thus, from the Table-'B' above, it was clear that the additional Fit of 8.52% of the turnover should have resulted in commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of the additional ITC should have been passed on by the Respondent to the recipients and thus, by not reducing the pre-GST base price by 8.52% on account of additional benefit of ITC and charging GST @12% on the pre-GST base price, the Respondent had contravened the provisions of Section 171 of the of the CGST Act, 2017. j. On the basis of the aforesaid CENVAT/input ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the report of the DGAP. 4. This Authority, after carefully considering the Reports filed by the DGAP, the submissions of the above Applicant and the Respondent and other material placed on record had observed certain discrepancies in the DGAP's Report dated 01.07.2019 and accordingly ordered reinvestigation in the matter in terms of Rule 133(4) of CGST Rules, 2017 vide its I .O. No. 06/2020 dated 03.01.2020 mentioned in paragraph 1 above. 5. As per the directions of this Authority passed vide I.O. No. 06/2020 dated 03.01.2020 under Rule 133 (4), the DGAP furnished his Report dated 30.12.2020 in accordance with Rule 129 (6) of the CGST Rules, 2017, stating therein, as under:- a. On receipt of the aforesaid I.O. from this Authority on 07.01.2020, the Respondent was issued letter dated 26.08.2020 for submitting the details/documents in accordance with the issues raised by Authority vide the above I.O. Further, the information/documents submitted by the Respondent were re-examined and cross-verified with the Report dated 01.07.2019 submitted by DGAP to this Authority. b. Period covered by the current investigation was from 01.07.2017 to 31.12.2018. c. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 was Rs. 91,99,49,382/-, however during the present investigation the books of accounts of the Respondent had got audited and all reconciliation had been made, therefore the Respondent submitted the revised list of home-buyers in which the turnover reported for the period 01.04.2016 to 30.06.2017 was Rs. 41,87,42,269/- and for the period 01.07.2017 to 31.12.2018 was Rs. 93,92,50,976/-. vii. The Respondent also stated that in the report dated 01.07.2019 submitted by the DGAP, the turnover as per home buyers list reported in the Table-A as Rs. 80,23122,679/- in the pre GST period and Rs. 89,31,85,597/- in the post GST period was not in accordance with the home buyers list submitted by DGAP through annexure 17 along with the report. Thus, in view of facts, the he requested to re-check the calculations of profiteering. e. Vide the aforementioned letters/e-mails; the Respondent submitted the following documents/information: i. List of home buyers for the project Himalaya Pride from 01.04.2016 to 31.12.2018. ii. Confirmation/undertaking from the buyers to whom the benefit of ITC was already passed on by the Respondent. iii. Allotment letters and demand note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Services Tax Act, 2017, which read as under: Section 17 (2) Where the goods or services or both was used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempted supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as was attributable to the said taxable supplies Including zero-rated supplies': Section 17 (3) The value of exempted supply under sub-section (2) shall be such as might be prescribed and shall include supplies on which the recipient was liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building . Therefore, the ITC pertaining to the unsold units might not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to him post-GST. h. The Respondents concern to re-visit the calculation of profite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profiteering, it was observed that prior to 01.07.2017, Le., before the GST was introduced, the Respondent was eligible to avail credit of Service Tax paid on the input services (CENVAT credit of Central Excise duty was not available) in respect of the flats for the project Himalaya' Pride sold by them. The Respondent was not eligible to avail ITC of VAT paid on the inputs, as he was not collecting the VAT from the customers and discharging his output tax liability on deemed 10% value addition on purchase value in cash and there was no direct relation of turnover reported in VAT returns with the amount collected from the home buyers. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. From the data submitted by the Respondent covering the period from April, 2016 to 31.12,2018, the details of the ITCs availed by them, his turnover from the project Himalaya Pride the ratios of ITC to turnovers, during the pre- ST (April, 2016 to June, 2017) and post-GST (July, 2017 to 31.12.2018) periods, have been furnished by the DGAP in Table-C below:- Table-C (Amount in Rs.) S.No. Partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr.No. Particulars 1. Period A July, 2017 to December,2018 2. Output GST rate (%) B 12 3. Ratio of CENVAT credit/ ITC to Total Turnover as per table B above (%) C 8.31%/1.94% 4. Increase in ITC availed post-GST (%) D=8.31% less 1.94% 6.37% 5. Analysis of Increase in input tax credit: 6. Base Price raised during July, 2017 to December, 201B (Rs.)# E 93,92,50,976 7. Less; Base Price raised during, 2017 to December, 2018 (Fiats sold after 01.07.2017 where GST was borne by the Respondent) F 62,14,00,839 8. Base Price raised during July, 2017 to December, 2018 (Rs.) (F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of soft copies of demand notes (issued to homebuyers),it appeared that out of 529 buyers (Pre GST bookings), the Respondent had not given any GST ITC benefit to 51 buyers as in respect of 29 buyers, no demand was raised in the post GST period i.e. till 31.12.2018 and for the remaining 22 buyers the Respondent had not given any ITC benefit even though the Respondent had raised demand and received payments from them in the post GST period, Therefore, it was a matter of fact that the Respondent had passed on the ITC benefit of Rs 2,26,26,126/- to 478 (529-(22+29) homebuyers in the pre GST period. However, in order to cross check the claim of the Respondent, e-mails were sent to 300 home buyers picked up randomly. Out of these 51 buyers apart from the Applicants had confirmed the receipt of ITC benefit given by the Respondent which was about 11% of the homebuyers list (pre GST bookings) submitted by the Respondent. The details of confirmation of the receipt of payment received through e-mails were enclosed. A summary of benefit of ITC required to be passed on and the ITC benefit claimed to had been passed on to the Applicant No. 1 and other home buyers, has been furnished by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 31.12.2018 Total 1208 14,87,766 93,92,50,976 2,26,76,700 2,26,26,126 q. It has also been mentioned by the DGAP that the Respondent had booked 766 fiats till 31.12.2018 including 48 units of Post O.C. sales. Thus 718 (766-48) units were sold before O.C. Out of these 718,189 buyers (Sr No. 3 of Table-E) were excluded while computing profiteering amount as the benefit of ITC was passed on to these buyers by way of waiving entire GST (12%) to these 189 buyers as per his allotment letters and demand notes. Since no GST had been charged from the 189 buyers, it implied that the Respondent had passed on the entire GST (12%) to them whereas as per Table-'A' above, the Respondent was required to pass on only 6.37% to them. Hence, these 189 buyers were out of the purview of computation of profiteering. In respect of 29 buyers (Sr No. 5 of Table- E) no consideration was received during the period of investigation. Hence, the said 29 buyers had also been kept out of the computation of profiteering. The details were give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period and Rs. 7,45,18,460/- to the buyers who had booked flats in the post GST period by not collecting the GST from them. Further, the claim of the Respondent was also confirmed from the buyers on sample basis. II. Whether the Respondent's claim that for the customers who had made the booking prior to implementation of GST, i.e. 01.07.2017, he had charged only 4.5 /o GST (i.e. equal to the rate of erstwhile Service Tax) from them and borne the remaining 7.5% GST himself and he had given 100% reduction in GST rate for new booking of the fiats was correct? Reply :- Based on the Respondent submission, it was observed that out or 529 buyers who had booked flats prior to implementation of GST, the Respondent had passed on the ITC benefit of Rs. 2,26,26,126/- to 478 buyers and in case of 22 buyers no benefit had been passed on by the Respondent. Further, in respect of 29 buyers, no consideration was received in the post GST period till 31.12.2018. From the above Table E , it was also observed that the benefit claimed to have been passed on by the Respondent was less than what he ought to have passed on in case of 124 buyers (Sr. No.2 of Table-E), by an amount of Rs. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions of the Respondent, the ITC benefit of Rs. 3,44,130/- was passed on to the Applicant till 31.12.2018 instead of Rs. 2,94,078/- and the same was reflected in the demand note of the Applicant No. 1 and confirmed by him. IV. Whether the Respondent had given an amount of Rs. 3,41,963/- as discount in addition to reduction in GST rate of 7.5% to the Applicant No. 1? Reply:- Based on the Respondent submission, it was observed that the Applicant No. 1 had booked the flat no. C-4/6 in the post GST period, wherein the Respondent had given ITC benefit @12% GST by not collecting the same from the Applicant No. 1. It was to submit that the Respondent had not given any discount of Rs. 3,41,963/- in addition to reduction in GST rate of 7.5% to the Applicant No. 1. However, the matter of fact was that, the Respondent had given GST ITC benefit of Rs. 3,44,130/- to the Applicant No. 1 till 31.12.2018, by giving 100% reduction in the applicable GST rate. V. Whether the above amounts claimed to have been passed on by the Respondent were in line with the Provision of Section 171 of the CGST Act, 2017? Reply:- It had been verified from the documentary evidences submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax on any supply of goods or services or the benefit of 1TC shall be passed on to the recipient by way of commensurate reduction in prices , had been contravened in the present case. 6. The above report of the DGAP dated 30.12.2020 was considered by this Authority in its sitting held on 05.01.2021 and it was decided to allow the Respondent and the Applicant No. 1 to file their consolidated written submissions in respect of the above report of the DGAP by 20.01.2021. Notice was also issued to Respondent directing him to explain why the Report dated 30.12.2020 furnished by the DGAP should not be accepted and his liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. 7. The Respondent filed his submissions dated 20.01.2021 vide which he stated that he had made his final submissions before this Authority wherein he had requested to consider the following submissions:- a. Material and Services taken for providing services other than real estate business has? also considered as input on the said material and services for real estate business. b. He has passed on the benefit of ITC more than the total profiteered amount calc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at beside six issues framed by it vide Interim Order No. 6/2020 dated 3.1.2020; the Authority also finds that the following issues need to be addressed:- a. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by Respondent? b. Whether Respondent No. 1 has passed on the commensurate benefit of reduction in the rate of tax to his customers? 12. A perusal of Section 171 of the CGST Act shows that it provides as under:- (1) 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. (2). The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether Input Tax Credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. 13. The Reports dated 01.07.2019 and 30.12.2020 submitted by the DGAP have been carefully examined by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomers homebuyers/customers who have booked their Units before 1.07.2017 on whom demands have been raised during the period covered by this investigation/Order i.e. from 01.07.2017 to 31.12.2018). vi. The ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was 1.94% and during the post-GST period this ratio was 8.31%, as per the Table-C mentioned above and therefore, the Respondent has benefited from the additional ITC to the tune of 6.37% (8.31% - 1.94%). vii. However, for the purpose of calculation of profiteered amount, the turnover amounting to Rs. 62,14,00,839/-(in respect of these 189 homebuyers/customers who had booked Units in the post-GST regime and whose allotment letters and demand notes dearly mentioned that the Respondent has borne all the GST and not charged from the homebuyers/customers) have been excluded from the Total Turnover amounting to Rs. 93,92,50,976/- raised by the Respondent during July-2017 to December-2018. Hence, the Turnover considered for the calculation of the profiteered amount during the investigation period was Rs. 31,78,50,137/-. viii. The Demand Note dated 03.11.2020 issued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide e-mail dated 14.12.2020 has confirmed that the Respondent has borne all the GST part and the same was not collected from him and hence, the benefit of ITC was included. Hence, the claim of the Applicant No. 1 that the Respondent has not passed on the benefit of ITC to him appears to be incorrect as the Applicant No. 1 has confirmed the receipt of benefit of ITC himself through e-mail dated 14.12.2020. 14. In view of the above said discussion and observations, the Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP's Report or the methodology adopted. 15. The Authority finds that, the DGAP has given a categorical report based on its verification that, the benefit of ITC has been passed on by the Respondent to all 189 homebuyers/customers who have booked their units on or after 1.07.2017 by way of giving deduction in the demand note itself as per the example reproduced above. The findings at para 10 and 11 of the DGAP's Report dated 30.11.2020 are reproduced at paragraphs 50), 5(J) and 5 (k) above and the DGAP states that it has scrutinized the demand notes and allotment letters issued to these 189 homebuyers/customer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment, as per provisions of Rule 133 (3) (b) of the CGST Rules 2017. 21. The Authority also order that the profiteered amount of Rs. 2,26,76,700/- along with the interest @ 18%, from the date of receiving such amounts from the homebuyers/customers till the date of passing on/return of such amount, shall be paid/passed on by the Respondent within a period of 3 months from the date receipt of this order failing which it shall be recovered as per the provisions of the CGST Act, 2017. 22. The complete list of eligible homebuyers/customers has been attached with this Order, with the details of amount of benefit of ITC to be passed along with interest @ 18% as in the Annexure-1 to this order. 23. The concerned jurisdictional CGST/SGST Commissioner is directed to ensure compliance of this Order. It may be ensured that the benefit of ITC is passed on to each homebuyer as per Annexure-1 attached with this Order along with interest @18%, if not paid already. In this regard an advertisement of appropriate size to be visible to the public may also be published in minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of builder ..... X X X X Extracts X X X X X X X X Extracts X X X X
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