TaxTMI 
TaxTMI 
2019 (7) TMI 138
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....ion dated 08.05.2018 filed by the Applicant No. 1 to the Standing Committee on Anti-Profiteering under Rule 128 of the CGST Rules, 2017. The Applicant No. 1 had stated in his application that the Respondent had resorted to profiteering in respect of supply of construction services related to purchase of an apartment in the project "Independent Floor Phase-II" at Plot No. 18, Ground Floor, Street No. F 3.1, Sector-82, Vatika India Next, Gurugram-122004. 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 apartment purchased by him, on implementation of GST w.e.f. 01.07.2017. The said application was examined by Haryana State Screening Committee in its meeting held on 20.06.2018 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 of the CGST Act, 2017 and forwarded the same with its recommendation to the Standing Committee on Anti-Profiteering for further action in terms of Rule 128 of the CGST Rules, 2017. The said application was examined by the Standing Committee on Anti-Profiteering in its meeting held on 07.08.2018 & ....
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....d 06.02.2019 stating that the construction of the project "Independent Floor Phase-II" was completed prior to 01.07.2017 and that he had neither availed ITC on any of its inputs procured in the GST regime, nor did he avail/carry forward the pre-GST credit pertaining to the stock held in hand as on 30.06.2017. Further, in reply to the allegation of Applicant No. 2 regarding collection of Service Tax from the previous allottee of the Unit No. 48, Ground Floor, S-1, Sector-82, Vatika India Next, the Respondent submitted that the Applicant No. 2 was the first allottee of the said unit and it was never allotted to anyone before him. The Respondent had also submitted the following documents for the period July-2017 to August-2018 for all the projects related to the Applicant No. 1 and 2 a. Copies of GSTR-1 returns. b. Copies of GSTR-3B returns. c. Copies of Tran-1 returns in respect of transitional credit availed. d. Copies of VAT & ST-3 returns. e. Electronic Credit ledger. f. Copies of all demand letters and sale agreement/contract and construction agreement. g. Tax rates- pre-GST and post-GST. h. copy of Balance S....
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....with the bank officials visited the site on 10.09.2017, found that no work had commenced for their floor and as such bank was not ready to disburse the loan against the construction. A representation was made to the Respondent in this regard, and the Respondent assured to commence the work. All these payments including GST as demanded by the Respondent were paid. The Respondent had been demanding the payment from the buyers even without construction of flat on Plot No. 18, Street F-3.1, EMillia Floor, Sector-82, Gurgoan. He has also attached copies of e-mails from other aggrieved buyers. b. Further, a demand for an amount of Rs. 2,33,660/- including GST @ 18% was raised by the Respondent on offer of possession, although the flat was not ready. However, the same was paid to the Respondent. The Respondent handed over the keys of the property without any OC/registration. c. The Applicant No. 1 also stated that the construction of the flat was carried out by the builder post-GST regime and GST @18% was charged against various stages of construction and a substantial amount on account of GST had been charged. He also stated that besides GST, an amount of Rs. 10,662/- w....
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....of the master layout of the township "due to certain fine tunings" and that "amendments in the master layout (were) necessitated due to architectural and other related considerations" He was invited to visit Vatika office at Gurgaon on 20.7.2017 for re-allotment of an alternative unit. f) On his visit to Vatika office, he was offered re-allotment of a dwelling unit in a proposed multi-storey cluster. Considering certain serious drawbacks in the offer for re-allotment, he had declined the offer. g) He visited Vatika office again on 3.10.2017 when he was offered for re-allotment of Unit 48, GF, S-1, Sector 82, Vatika India Next (the Apartment), in lieu of the Independent Floor assigned to him by Mrs. Maya Pruthi, which was accepted by him. h) He enquired from the concerned executive the reason for which the Apartment was not offered to him when he visited earlier on 20.7.2017. He was informed that the Apartment had become available after 20.7.2017 on cancellation of allotment of the person who was originally allotted the Apartment (original allottee). i) The Apartment was finally allotted to him on 02.11.2017. j) On 09.11.2017, he received....
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....s." n) Apart from Clause 2 of the BBA, there is no other provision enabling the Respondent to recover taxes from the Applicant No. 2. o) A bare perusal of Clause 2 of the BBA suggests that the taxes, duties etc. contemplated therein are to be shared in proportion to the built-up area of the Apartment vis-å-vis the total area of the whole Vatika India Next complex. In other words, the taxes, duties etc that are levied on the Vatika India Next complex as a whole are reimbursable under Clause 2 of the Builder Buyer Agreement. p) Since GST is levied ad valorem and not based on the built-up area of the Apartment, reimbursement of GST based on the built-up area is not contemplated under Clause 2 of the Builder Buyer Agreement. q) The Service Tax was in force in April 2011 when the BBA was executed. Yet there was no mention of its recovery in Clause 2 which mentioned the property tax, wealth tax etc. r) In this view of the matter, GST, like other taxes such as Central Excise Duty, Central Sales Tax, State Sales Tax, VAT, entry tax, municipal taxes etc. which are not included in Clause 2 of the BBA, is to be borne by the Respondent. ....
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....mal invoices for the recoveries of the Service Tax/GST from the original allottee on cancellation of the Apartment were issued by the Respondent, there was a strong possibility that the amount recovered from the original allottee was not deposited with the Government. This is, however, a matter of verification by the Revenue authorities. z) He was informed by the Respondent in its email dated 13.11.2017 that the above 4 stages of construction were completed during February 2016 to September 2016. On completion of these 4 stages, invoices, including the Service Tax would have been issued to the original allottee. aa) The services supplied to him in November 2017 were the same as earlier supplied to the original allottee during 2016, for which the Service Tax/GST was recovered from the original allottee. bb) It is an established principle of taxation that a single transaction cannot be subjected to taxation twice (double taxation). By invoking this principle, the Respondent could not have collected GST from him on re-allotment of the Apartment. cc) The legislative policy to avoid double taxation has been incorporated in subsection (11) of Section 1....
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....ts (goods and services) going into the construction of flats were being passed on to the allottees in the cost agreed under the BBA and such cost was inclusive of taxes. mm) In accordance with the GST Act, under the GST regime, the pre-GST taxes have been subsumed in GST. Now the embedded input taxes are to be utilised for offsetting GST rate of 12% applicable in case of under-construction flats. nn) In the current scenario, the Respondent is expected to pass on the benefits of lower tax burden to him by way of reduced GST rate. oo) In the message sent to the Respondent on 28.12.2017 on its Client Service Portal, he had sought benefit of ITC and adjustment of the excess recovery made from him. The Respondent in its reply sent under email dated 29.12.2017 informed him that ITC was being worked upon and he would be informed of its applicability. pp) In reply to his next email dated 14.3.2018 to the Respondent seeking adjustment of ITC, he received a reply email dated 19.3.2018 informing that the work was under process. qq) He sent a letter dated 22.5.2018 seeking expeditious settlement and adjustment of ITC. In reply to the said letter dat....
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....ese documents to the extent permitted by law. The copies of the following documents referred to in this communication have been attached for reference: 1. Copies of Invoices dated 7.11.2017, 2. Copy of letter dated 17.9.2014, addressed to Mr. Tarun Rana 3. Respondent's email dated 13.11.2017, 4. Respondent's email dated 29.12.2017, and 5. Emails exchanged with the Respondent on issue of original allottee. 9. Supplementary Report was sought from the DGAP on the issues raised by the Applicants through their submissions dated 09.04.2019 & 10.04.2019 respectively. The DGAP vide his Report dated 25.04.2019 has stated that in the Report dated 25.02.2019, the ITC availed by the Respondent as a percentage of the Respondent's total turnover, both in the pre-GST and post-GST period, has been worked out and compared to determine whether there was any additional benefit of any ITC in the post-GST period. As the Respondent submitted that he had not availed any ITC in the post-GST period, there could not be any additional benefit of ITC available to the Respondent after implementation of the GST w.e.f. 01.07.2017. The Respondent had ....
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....ided by the Authority are as under:- 1) Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 in this case? 2) If yes then what was the quantum of profiteering? 12. 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." 13. 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 in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP's Report that no ITC has been availed by the Respondent in the post-GST period and therefore, there was no additional benefit of ....