TaxTMI 
TaxTMI 
2019 (3) TMI 1470
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....Applicants) to the Standing Committee on Anti-profiteering, under Rule 128 of the CGST Rules, 2017. The Applicants had stated in their complaint that the Respondent had resorted to profiteering in respect of the purchase of Flat No. A701, constructed by the Respondent in his "Vrindavan Yojna Project", Rae Bareli Road, Lucknow. The Applicants had further alleged that the Respondent had increased the price of the flat after implementation of the Goods & Service Tax (GST) w.e.f. 01.07.2017 and had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price of the flat purchased by them. They had also claimed that the Respondent had committed contravention of the provisions of Section 171 of the CGST Act, 2017 and hence appropriate action should be taken against him. 2. The Standing Committee vide the minutes of its meetings dated 07.08.2018 & 08.08.2018 had requested the DGAP to initiate investigation under Rule 129 (1) of the CGST Rules, 2017 and collect evidence necessary to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients or not? 3. After examination of the applic....
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.... by paying Rs. 1,00,000/- including the Service Tax and provisional allotment was made to them vide letter dated 20.05.2017 and the agreement to sell was executed on 22.05.2017. The DGAP has also intimated that the Respondent had further stated that meanwhile, the GST had come in to force w.e.f. 01.07.2017 and the flat was almost complete and hence as per the agreement dated 22.05.2017, the Applicants were asked to pay Rs. 59,14,590 plus taxes as per the following schedule:- i. Amount on booking- Rs. 1,00,000/- including Service Tax @ 4.5%. ii. Within 60 days from booking- Rs. 52,27,437/- plus Service Tax/GST. iii. On offer of possession- Rs. 5,91 ,459/- plus GST. The Respondent had also submitted that the Applicants had deposited an amount of Rs. 50,40,000/- including 12% GST and were verbally informed that since the building was almost complete the Respondent would not be eligible to avail full benefit of ITC but whatever ITC he would be availing the benefit of the same would be transferred to the allottees, in proportion to the amount outstanding as on 01.07.2017. The Respondent had further submitted that the completion certificate was issued on 06.08.2018 and during....
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....register for April, 2016 to June, 2017, Project Completion Certificate along with working of proportionate ITC reversed on unsold units, details of turnover, output liability, GST payable and the ITC availed, list of home buyers in the project "Vrindavan Yojna" and communication to all the customers about passing on of the GST benefit along with cheques of benefit passed on. 8. The DGAP has further informed that the main issue for determination in the present case was whether there was reduction in the rate of tax or the benefit of ITC was available to the Respondent on the supply of construction service after implementation of the GST w.e.f. 01.07 2017 and if so, whether any benefit was required to be passed on to the recipients by him in terms of Section 171 of the CGST Act, 2017. 9. The DGAP has also submitted that the Respondent vide his replies dated 01.10.2018 & 10.10.2018 had supplied copy of the agreement to sell executed by him with the Applicants, agreement form and the demand letters issued by him to the Applicants for the purchase of flat No. A701, measuring 1,762 square feet, at the basic sale price of Rs. 3,357/- per square feet. He has also intimated the detail....
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....t received or to be received by him from the Applicants and the other recipients after implementation of the GST was required to be taken into account for determining the quantum of benefit to be passed on. 11. The DGAP has also argued that para 5 of Schedule-III of the CGST, 2017, which defined activities or transactions which should be treated neither as a supply of goods nor a supply of services reads as "Sale of land and, subject to clause (b) of para 5 of Schedule Il, sale of building" and Clause (b) of para 5 of Schedule II of the CGST Act, 2017 reads as "(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier". He has therefore, contended that in view of these provisions, the ITC in respect of the units not sold was required to be reversed in terms of Sections 17 (2) & 17 (3) of the CGST Act, 2017 which read as under:- 17 (2) Where the goods or services or both are used by the regi....
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.... the Respondent and his taxable turnover during the pre amd post GST periods as per the Table-E given below:- Table-E (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) July, 2017 to August, 2018 Balance BSP Amt. to be Collected as on 31.08.2018 Total (Post-GST) (1) (2) (3) (4) (5) (6) (7) (8) 1 CENVAT of Service Tax Available (A) 1,51,232 2,06,231 3,57,463 - - - 2 Input Tax Credit of GST Availed as per GST Return (B) - - - 37,24,923 - 37,24,923 3 Total Taxable Turnover as per Returns (C) 8,04,63,461 4,95,43,604 13,00,07,065 - - - 4 Total Taxable Turnover Post GST (D) - - - 7,75,23,049 3,49,57,942 11,24,80,991 5 Ratio of CENVAT/ Input Tax Credit to Taxable Turnover [(E)=(A)/(C)] or [(E)=(B)/D)] 0.27% 3.31% 13. Based on the above computation the DGAP has stated that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period from April, 2016 to June, 2017 was 0.27% and during the post-GST period w.e.f. July, 201....
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.... from the above table, it was clear that the additional ITC of 3.04% of the amount received and the balance amount as on 31.08.2018, should have resulted in commensurate reduction in the base price as well as cum-tax price and the Respondent in terms of Section 171 of the CGST Act, 2017, was required to pass on the above benefit to the recipients. The DGAP has further submitted that the Respondent had admitted that the benefit would have to be passed on to the recipients and in fact he had already passed on an amount of Rs. 30,73,671/- which had been duly verified from the copies of the cheques issued by the Respondent. 14. The DGAP has also claimed that on the basis of the aforesaid CENVAT/ITC availability pre and post-GST and the details of the amount collected by the Respondent from the Applicants and the other home buyers during the period from 01.07.2017 to 31.08.2018 and the amount outstanding as on 31.08.2018, the amount of benefit of ITC that needed to be passed on by the Respondent to the recipients or the profiteered amount came to Rs. 38,29,753/- which included 12% GST on the base profiteered amount of Rs. 34,19,422/-. This amount was inclusive of Rs. 1,98,122/- inclu....
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....cants in the present proceedings. He has also intimated that all these recipients were identifiable as the Respondent has supplied their names and addresses along with the unit no. allotted to them and hence, the additional amount of Rs. 7,17,979/- was required to be passed on to such eligible flat buyers. 17. The above Report was considered by the Authority in its sitting held on 03.11.2018 and it was decided to hear the Applicants and the Respondent on 19.12.2018. 18. The first hearing was held on 19.12.2018 wherein the Applicants were represented by Shri Vivek Gupta; Applicant No. 3 was represented by Sh. Rana Ashok Rajneesh, Assistant Commissioner and the Respondent was represented by Sh. Satpal Singh, Director. 19. The Respondent has filed written submissions on 20.12.2018 through which he has intimated that the Applicants had offered to purchase flat No. A-701 for total consideration of Rs. 59,14,590/- excluding taxes and had paid advance of Rs. 1,00,000/- on 01.05.2017 which was accepted by the Respondent on the understanding that the basic cost and the taxes as applicable would be charged and an agreement to sell was accordingly signed. He has further stated that a....
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....intimated that the issues raised by the Respondent had already been covered in the Investigation Report itself. 21. We have carefully perused the DGAP's Report, the written submissions of the Respondent and all the other material placed on record. The issues to be decided by this Authority in this case are as under:- 1) Whether there was any violation of the provisions of Section 171 (1) of the CGST Act, 2017 in this case? 2) If yes then what was the quantum of profiteering? 22. 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." 23. It is clear from the plain reading of Section 171 (1) mentioned above 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 hence, this issue is not relevant in this case.....
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.... 34,19,422/- as per the details furnished by the DGAP. Accordingly, under Rule 133 (3) (a) of the CGST Rules, 2017 it is ordered that the Respondent shall reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC availed by him as has been detailed above. The above amount of profiteering includes an amount of Rs. 1,98,122/- including GST @12% on the base amount of Rs. 1,76,894/- which has been profiteered by the Respondent from the Applicants. The Respondent has already refunded Rs. 1,60,020/- to the Applicants and has further paid an amount of Rs. 38102/- to them vide Cheque No. 548567 dated 14.12.2018 (Total Rs. 1,60,020+Rs. 38102=Rs. 1,98,122). However, he has not paid interest @18% to the above Applicants from the date from which the above amount was profiteered by him. Therefore, the Respondent is directed to pay interest to the Applicants @18% from the above date. The Respondent is also directed to refund an amount of Rs. 7,17,979/- to the rest of the flat buyers. The Respondent has not submitted the details of the above amount which he had agreed to refund to the other 64 flat owners accordingly, he is directed to refund an amount of R....