2023 (9) TMI 762 - CCI - GST

Real estate developer cleared of anti-profiteering charges under Section 171 CGST Act as no additional ITC benefits were received

Sh. Vivek Kumar, Director General of Anti-Profiteering, Central Board of Indirect Taxes & Customs, Versus M/s Bhartiya Urban Pvt. Ltd. (Formerly Known as M/s. Bhartiya City Developers Pvt. Ltd.),

The Competition Commission of India examined whether a real estate developer contravened anti-profiteering provisions under Section 171 of CGST Act by not ... Profiteering - Respondent had not passed on the benefit of ITC to him by way of a commensurate reduction in the price of the flat purchased by him - contravention of section 171 of CGST Act - HELD THAT:- It is clear from the plain reading of Section 171 (1) mentioned that it deals with two situations, one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post GST period. Hence, the only issue to be examined is as to whether there was any additional benefit of ITC with the introduction of GST. The Commission observes that, the ITC, as a percentage of 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. 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 information was sought from the Karnataka RERA only to confirm whether the Respondent has kept separate accounts for each project or not. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. Accordingly, the proceedings initiated against the Respondent under Rule 133 (4) of the CGST Rules, 2017 are hereby dropped. Issues Involved:1. Allegation of profiteering by not passing on the benefit of Input Tax Credit (ITC) post-GST implementation.2. Investigation of all projects under the same GST registration number.3. Examination of the period covered by the investigation.4. Compliance with Section 171 of the CGST Act, 2017.Summary:Issue 1: Allegation of ProfiteeringThe Applicant No. 1 alleged that the Respondent had not passed on the benefit of ITC by way of commensurate reduction in the price of the flat purchased post-GST implementation. The DGAP's initial report indicated that the Respondent had not benefited from additional ITC, as the percentage of ITC to turnover had decreased from 9.95% pre-GST to 9.25% post-GST. The DGAP concluded that the provisions of Section 171 of the CGST Act, 2017 were not attracted as there was no additional benefit of ITC post-GST.Issue 2: Investigation of All ProjectsThe NAA directed the DGAP to investigate all other projects under the same GST registration number (29AAACZ3571A1ZF) to ensure a comprehensive assessment. The Respondent's projects included Nikoo Homes-I, Nikoo Homes-II, and Leela Residences. The DGAP re-investigated and confirmed that the Respondent had not maintained separate books of accounts for any wing, and profiteering, if any, had to be computed by considering the total ITC availed and the total turnover of the complete project.Issue 3: Period Covered by InvestigationThe DGAP extended the investigation period from 01.07.2017 to 31.10.2019, as approved by the NAA. The Respondent provided necessary documents and information, including GSTR-1 and GSTR-3B returns, RERA project reports, and ITC registers for the specified period.Issue 4: Compliance with Section 171 of the CGST Act, 2017Section 171 mandates passing on the benefit of ITC or reduction in tax rate to the recipient by way of commensurate reduction in prices. The DGAP's re-investigation revealed that the ITC as a percentage of turnover was lower post-GST (9.27%) compared to pre-GST (9.95%). Additionally, the effective tax rate increased from 16.15% pre-GST to 18% post-GST. Therefore, no additional ITC benefit was available to the Respondent, and the conditions of Section 171 were not met.Conclusion:The Commission concluded that the Respondent did not benefit from additional ITC post-GST and had not violated Section 171 of the CGST Act, 2017. The proceedings against the Respondent were thereby dropped.