Respondent found guilty of not passing on Input Tax Credit benefits to buyers under CGST Act, 2017.

The respondent was found to have not passed on the benefit of Input Tax Credit (ITC) to buyers, contravening Section 171 of the CGST Act, 2017. The profiteered amount was calculated at Rs. 6,24,48,008/-, including GST, based on ITC turnover ratios pre and post-GST. The methodology used by the DGAP was deemed appropriate, and the respondent was directed to pay the profiteered amount to eligible buyers with interest, reduce prices accordingly, and undergo further investigation for compliance. Penalty under Section 171 (3A) could not be imposed retrospectively due to the timing of the violation.

---

---

Issues Involved:
1. Non-passing of the benefit of Input Tax Credit (ITC) to buyers.
2. Calculation of profiteered amount.
3. Methodology for determining profiteering.
4. Examination of pre-GST and post-GST ITC benefits.
5. Impact of statutory provisions and notifications on ITC and pricing.
6. Liability for penalty under Section 171 (3A) of the CGST Act, 2017.

Detailed Analysis:

1. Non-passing of the Benefit of ITC to Buyers:
The applicants alleged that the respondent did not pass on the benefit of ITC by way of a commensurate reduction in prices of flats in the "Aangan" project. The DGAP's investigation confirmed that the respondent had benefited from additional ITC post-GST implementation but did not reduce the basic price of the flats accordingly, thus contravening Section 171 of the CGST Act, 2017.

2. Calculation of Profiteered Amount:
The DGAP calculated the profiteered amount as Rs. 6,24,48,008/-, which included GST on the base profiteered amount. The calculation was based on the ratio of ITC to turnover during the pre-GST and post-GST periods. The respondent's contention that the profiteered amount could not exceed the ITC availed was dismissed, as the DGAP's calculation included the excess tax (GST) collected from buyers, which they were not liable to pay.

3. Methodology for Determining Profiteering:
The DGAP used a mathematical methodology to compute the ratio of CENVAT credit and ITC to the total turnover for the pre-GST and post-GST periods. This methodology was deemed logical, reasonable, and in consonance with Section 171 (1) of the CGST Act. The respondent's objections to this methodology were not accepted, as the DGAP's approach was consistent with previous cases in the real estate sector.

4. Examination of Pre-GST and Post-GST ITC Benefits:
The DGAP found that the respondent had no CENVAT credit available during the pre-GST period due to the exemption from Service Tax for affordable housing projects. Post-GST, the respondent availed ITC on inputs and input services, leading to an additional benefit of ITC that was not passed on to buyers. The respondent's claims of having paid Service Tax and availed CENVAT credit during February 2016 were not substantiated with sufficient evidence.

5. Impact of Statutory Provisions and Notifications on ITC and Pricing:
The Haryana Affordable Housing Policy (AHP) fixed the maximum allotment rate for flats, considering the cost of construction materials and input services. The respondent's claim that the pricing was determined based on the availability of CENVAT credit during the pre-GST period was not accepted, as the AHP rate remained unchanged despite the exemption from Service Tax and the subsequent ITC benefits post-GST.

6. Liability for Penalty under Section 171 (3A) of the CGST Act, 2017:
The respondent was found to have denied the benefit of ITC to buyers, committing an offence under Section 171 (3A). However, since the provisions of Section 171 (3A) came into force on 01.01.2020, and the violation period was from 01.07.2017 to 31.12.2018, the penalty could not be imposed retrospectively.

Conclusion:
The respondent is ordered to pay the profiteered amount of Rs. 6,24,48,008/- to the eligible buyers within three months, along with interest at 18% per annum. The respondent is also directed to reduce the prices commensurate with the benefit of ITC. The DGAP is instructed to investigate the other phases of the "Aangan" project to ensure compliance with Section 171 (1) of the CGST Act. The Commissioners of CGST/SGST Haryana are to monitor the implementation of this order and report compliance within four months.

---