TMI Blog2023 (9) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the pre-GST period (April-2016 to June-2017) was 9.95%, whereas, during the post-GST period (July-2017 to October, 2019), it was 9.27%. Hence, the Respondent has availed lesser ITC to the extent of 0.68% [9.95% (-) 9.27%] of the turnover as compared to the pre-GST period. This confirms that in the post-GST period, the Respondent has not been benefited from additional ITC as percentage of the turnover that was available to the Respondent during post-GST is lower than during the pre-GST. It is observed that the provision of the RERA Act, 2016 makes it mandatory for a real estate developer/promoter to maintain separate bank accounts for each of his projects registered separately under the RERA Act, 2016. In view of this, Secretary of Real Estate Regulatory Authority, Karnataka vide letter dated 12.10.2020 and subsequent reminder dated 29.01.2021 and 24.02.2021 was requested to intimate whether the Respondent has maintained separate accounts for Nikko Homes-I, Nikko Homes-II and Leela Residences projects. In reply, vide the letter dated 04.03.2021 Karnataka RERA has informed that M/s. Bhartiya Urban Pvt. Ltd. has maintained separate Bank accounts for above projects. The above inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent's project Nikoo Homes-I , Bhartiya City, Chokkanahalli, Yelahanka, Bengaluru, Karnataka-560054. The Applicant No. 1 had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price of the flat purchased by him, on implementation of GST w.e.f. 01.07.2017. ii. The DGAP had issued a notice dated 26.10.2018 and called upon the Respondent under Rule 129 of the CGST Rules, 2017 to reply as to whether the benefit of ITC had been passed on by him to the recipients by way of commensurate reduction in prices and also asked him to suo-moto determine the quantum of benefit which was not passed on. iii. The period of the DGAP's investigation in this case was from 01.07.2017 to 31.08.2018. iv. The Respondent had submitted his replies to the DGAP vide letters/emails dated 16.10.2018, 12.11.2018 and 12.02.2019. The Respondent had stated before the DGAP that the Applicant No. 1 had purchased an apartment in Nikoo Homes-I project, which comprised of 2,415 residential units in 10 Towers and the total area of the project was 32,28,666 sq. ft. and the project had commenced in May, 2013. v. The Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llments No. 12 13 and intimated that the Respondent had charged GST @18% in the demand letters. Earlier the Respondent used to charge VAT + ST + Cess @10.1%. Therefore, he had to bear an extra tax burden of 18% - 10.1% = 7.9% (Rs. 91,627) when the Central Government had reduced the GST rate from 12% to 5%. ix. Supplementary Report was sought from the DGAP on the issues raised by the Applicant No. 1 through his submissions dated 04.04.2019. The DGAP vide his Report dated 12.04.2019 intimated that the issue raised by the Applicant No. 1 was that there was an extra burden of 13% due to non-opting for the new scheme of paying GST @5% by the Respondent. In this regard, the DGAP stated that as per Notification No. 03/2019-Central Tax (Rate) dated 29.03.2019, the suppliers of Construction Service were given an option to pay tax on construction of apartments at the old rate of 18% with ITC or at the new rate of 7.50% without ITC. Therefore, if the supplier would have chosen the option for paying tax at the new rate i.e. @7.50% w.e.f. 01.04.2019, he would be denied ITC. The DGAP has further claimed that if the Respondent had chosen option 2 of paying tax @ 7.50% without ITC, there woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted his reply to the Point No. 15 of the DGAP's Report dated 07.03.2019 that Tower No. 1-9 were completed in multiple phases whereas Tower No. 1-6 were completed post-GST implementation. The Respondent had not disclosed the details of sold and unsold inventory which he should have provided for correct calculation of ITC. The Applicant No. 1 had further submitted reply to Point No. 16 of the DGAP's Report dated 07.03.2019 stating that the Respondent had provided the information of the project as a whole and he did not disclose Tower-wise information in the Table, though Towers were completed in multiple phases. He had further added that due to unavailability of Tower-wise information, exact quantum of ITC benefit which was to be passed on to the buyers could not be calculated. xii. On Perusal of the above submissions it was evident that the Applicant No. 1 had raised substantive issues pertaining to the passing of the benefit of ITC which needed to be addressed. In the interest of equity and justice, a notice was issued to the Respondent on 01.08.2019 to explain why he should not be held liable to pay the benefit of ITC to the above Applicant as well as to the other hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 to 31.08.2018. Further, it was observed that the Respondent had obtained all the OCs up to 28.07.2018 and till then, he had sold 2368 flats out of 2415 flats but he had not reversed the proportionate ITC related to the unsold units. 2) Since the OCs had been received in this case, calculation of additional ITC benefit which needed to be passed on by the Respondent could be different from other cases where additional ITC for a specific period and for specific buyers had been calculated. In this case, additional ITC benefits by considering the ITC available for complete period of construction of the project should have been calculated. 3) Further, it was observed that the Respondent had been availing the ITC even after receiving Occupancy Certificates. Therefore, additional ITC, which had been availed by the Respondent, after receiving the OCs, needed to be verified and dealt with from the perspective of Section 171 of the CGST Act, 2017. 4) The Respondent vide his submissions, filed through e-mail dated 06.09.2019, submitted the following information under the heading Details matching with the Returns In line with what DGAP has considered in their report for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,69,75,000 6,69,75,000 8,13,50,000 8,13,50,000 Kitchen 5,52,90,000 5,52,90,000 6,90,68,320 6,90,68,320 Others 9,41,36,664 9,41,36,664 4,85,22,318 Grand Total 77,22,27,522 2,08,09,68,757 2,85,31,96,279 70,42,61,770 2,28,48,41,732 2,98,91,03,502 Input Tax Credit Transitional Credit 21,02,69,946 21,02,69,946 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addl Carpark 61,49,686 61,49,686 7,67,745 7,67,745 BWSSB 1,05,41,934 1,05,41,934 18,51,30,085 18,51,30,085 Club House 49,26,795 49,26,795 7,96,68,899 7,96,68,899 Kitchen 30,32,541 30,32,541 7,20,33,469 7,20,33,469 Others 7,41,40,005 7,41,40,005 84,03,998 84,03,998 Grand Total 2,39,33,35,411 1,75,00,97,421 4,14,34,32,832 1,09,52,70, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 1,65,79,336 2,08,63,43,178 50,83,09,019 19,23,37,978 70,06,46,997 Floorrise 8,48,82,501 7,78,260 8,56,60,761 2,97,95,801 10,44,307 3,08,40,108 Carparking 13,99,78,837 9,41,291 14,09,20,128 4,67,74,882 12,20,796 4,79,95,678 Addl Carpark 61,49,686 61,49,686 7,67,745 7,67,745 BWSSB 1,05,41,934 1,05,41,934 18,51,30,085 18,51,30,085 Club House 49,26,795 49,26,795 7,96,68,899 7,96,68,899 Kitchen 30,32,541 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 2017. 4. Accordingly, the DGAP has carried out necessary re-investigation and on conclusion of the same, a report dated 30.09.2020 was sent to the NAA under Rule 133 (4) of the CGST Rules, 2017 which inter-alia stated that: - i. After receiving reference from the NAA, a letter was issued to the Respondent on 25.10.2019 calling upon him to submit the information/documents required to further investigate the matter. ii. The NAA vide letter dated 29.09.2020 approved to revise the period covered by the current investigation from 01.07.2017 to 31.10.2019. iii. The time limit to complete the investigation was extended up to 30.11.2020 by virtue of Notification No. 35/2020-Central Tax dated 03.04.2020, Notification No. 55/2020-Central Tax dated 27.06.2020 and Notification No. 65/2020-Central Tax dated 01.09.2020 issued by Central Government under Section 168A of the Central Goods and Services Tax Act, 2017 where, any time limit for completion or compliance of any action, by any authority, has been specified in, or prescribed or notified under section 171 of the said Act, which falls during the period from the 20th day of March, 2020 to the 29th day of November, 2020, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted and received 'OC' in phased manner as per Table-A' given below: Table-A' S.No. Wings No. of Units Date of OC 1 G, H I 837 20-03-2017 2 E and F 514 04-12-2017 3 C, D and J 508 23-04-2018 4 A and B 556 28-07-2018 Total 2,415 Although the Respondent had received OCs in phased manner, but he had availed input tax credit post receipt of OCs also as the Respondent had received certain invoices (for materials/services procured before issuance of OCs) even after issuance of OCs. Further, the Respondent also did not maintain separate books of accounts for any wings for booking of specific purchase expenses. Therefore, profiteering, if any, has to be computed by taking into account the total inpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rebate of VAT (WCT) for the payment made to registered Contractors or Sub-contractors (C) 14,45,39,494 - - - 4. Input Tax Credit of GST Availed (D) - 21,68,02,00 5,23,81,782 26,91,83,783 5. Input Tax Credit of GST reversed on receipt of OC (E) - 55,62,072 27,88,885 83,50,957 6. Total CENVAT/VAT/Input Tax Credit Available before reversal (F) = [(A)+(B)+(C)] or [(D) + (E)] 36,23,42,273 22,23,64,073 5,51,70,667 27,75,34,740 7. Total Turnover including land value as per Home Buyers List (G) 3,48,86,05,998 1,47,64,89,092 1,94,30,82,661 1,94,30,82,661 8. Total Saleable Area (in sq. ft.) (H) 32,28,666 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post introduction of GST. Section 171 (1) of the Central Goods and Services Tax Act, 2017 dealing with profiteering can be invoked in the event when there was a reduction in the rate of tax or there is an increase in the input tax credit. Since neither of the conditions prescribed under the aforesaid Section 171 (1) has been met, the said statutory provision is not applicable to the present case for the project Nikoo Homes - l . 9. A copy of the investigation Report dated 30.09.2020 was provided to the Applicant No. 1 as per the Minutes of the Meeting of NAA held on 05.10.2020 vide letter dated 07.10.2020. A letter was also written to Secretary, Real Estate Regulatory Authority, Karnataka requesting him to intimate whether the Respondent had maintained separate bank accounts for his projects Nikko Homes I, Nikko Homes-II and Leela Residences. Hearing in the matter was held on 29.04.2022 and the same was attended by Sh. Vivek Kumar, Applicant. During the personal hearing the Applicant No. 1 was heard. Further, the Applicant No. 1 also submitted his consolidated written submissions on 04.05.2022 where he re-iterated his earlier submission stating that the Respondent has charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 9.95%, whereas, during the post-GST period (July-2017 to October, 2019), it was 9.27%. Hence, the Respondent has availed lesser ITC to the extent of 0.68% [9.95% (-) 9.27%] of the turnover as compared to the pre-GST period. This confirms that in the post-GST period, the Respondent has not been benefited from additional ITC as percentage of the turnover that was available to the Respondent during post-GST is lower than during the pre-GST. 14. In the context of this case, we also refer to provisions of Section 4 (2) (I) (d) of the Real Estate (Regulation and Development) Act, 2016 which, inter- alia, provides as below:- that seventy percent. of the amounts realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose:- Provided that the promoter shall withdraw the amounts from the separate account, to cover the cost of the project, in proportion to the percentage of completion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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