TaxTMI 
TaxTMI 
2019 (9) TMI 1251
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.... on Anti-profiteering, under Rule 128 of the CGST Rules, 2017 in which he had alleged that he had booked a flat, in the Respondent's project "Paramount Emotions" situated in GH-05A, Sector 1, Greater Noida and the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price of the flat, on introduction of the Goods & Services Tax (GST) w.e.f. 01.07.2017. The Uttar Pradesh State Screening Committee on Anti-profiteering on prima facie having satisfied itself that the Respondent had not passed on the benefit of ITC had forwarded the said application with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the above Rules. 2. The above reference was examined by the Standing Committee on Anti-profiteering in its meeting held on 06.09.2018 and it had forwarded the same to the DGAP for detailed investigation. The application was sent to the DGAP along with the details submitted by the Applicant No. 1 viz. the duly filled in Form APAF-1, Copy of the demand letter issued at the time of possession, Copy of the letter of offer of possession and copy of the Voter ID card. ....
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....d on their payments which had caused severe cash crunch to him. The Respondent had further claimed that the slowdown in the construction industry with sales going down and unwillingness of the banks to support the industry, had led to a situation where the interest and other costs had arisen and the developers were not in a position to meet their statutory and other obligations. 9. The Respondent had further informed the DGAP that the Applicant No. 1 had transferred an amount of Rs. by RTGS on 28.03.2018 but he had not informed the Respondent about this payment and in March, 2019, the Applicant No. 1 had claimed to have paid the said amount with proof of payment and thereafter it was duly accounted for by the Respondent in March, 2019 and the above amount was kept in the client suspense account during the period from March, 2018 to March, 2019. 10. The Respondent had also furnished the Copies of GSTR-1 returns for the period from July, 2017 to March, 2018, Copies of GSTR-3B returns for the period from July, 2017 to March, 2018, Tran1 statement for the month of July, 2017, Copies of VAT & ST-3 returns for the period from April, 2016 to June, 2017, Copies of Electronic Credit L....
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....ad not filed the GSTR-1 and GSTR-3B returns after March, 2018. 13. The DGAP has also submitted in his Report that the ITC pertaining to the units not sold prior to the issue of Completion Certificate on 12.02.2018, was required to be reversed and the computation of the same has been furnished by him in the Table given below:- Table B (Amount in Rs.) Particulars Factor Amount Total Saleable Area of Flats (in sq. ft.) A 2249965 Area Sold before Completion Certificate was obtained (in sq. ft.) B 1945823 Area sold before Completion Certificate was obtained (in Percentage) C=B/A 83.48% Area remaining Unsold at the time Completion Certificate was obtained (in sq. ft.) D=A-B 304142 Area remaining Unsold at the time Completion Certificate was obtained (in Percentage) E=D/A 13.52% ITC available for the period between July, 2017 till August, 2018 F 70583035 Proportionate ITC to be reversed (in Rs.) G=F*E 9542833 ITC Availed post GST pertaining to sold Units H=F-G 61040252 The DGAP has further submitted that the Respondent had not made any reversal of the ITC, as was required in terms of Section 17(2)....
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....AP has also averred that from the VAT Returns submitted by the Respondent, it appeared that the Respondent was neither collecting VAT from his customers, nor was discharging any output VAT liability. Therefore, the ITC of VAT and the turnover related to VAT was not taken into account. The Report has also stated that the ITC ratio to the turnover during the pre GST period (April, 2016 to June, 2017) was 2.06% as compared to the post GST period (July, 2017 to August, 2018), where it was 4.48%, which indicated that in the post-GST period, the Respondent had benefited from additional ITC to the tune of 2.42% [4.48% (-) 2.06%] of the turnover. 16. The DGAP has also submitted that the profiteering had been examined by comparing the applicable tax rate and the ITC available during the pre-GST period (i.e. April, 2016 to June, 2017) when Service Tax was leviable @ 4.5% with the post-GST period (i.e. July, 2017 to August, 2018) when the GST rate was 12%, in terms of Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017. Thus, on the basis of the figures contained in the Table given above, the ratio of ITC to the turnover during the pre-GST and the post-GST periods, the turnover f....
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....iod but before the receipt of Completion Certificate on 12.02.2018. The Respondent had also sold 32 flats between 12.02.2018 to 31.08.2018, i.e., during the period of investigation but after receiving the Completion Certificate. The DGAP has further clarified that as these buyers would not suffer any burden of tax as GST was not applicable to the flats sold after receipt of the Completion Certificate on 12.02.2018, the Respondent would not be eligible to proportionate ITC in respect of such flats and the benefit of ITC was also not required to be passed on to the said home buyers. The Respondent would be eligible to avail proportionate ITC only in respect of the flats/ area sold prior to the issue of Completion Certificate on 12.02.2018. 19. The DGAP has also observed that the benefit of additional ITC of 2.42% of the amounts collected or to be collected by the Respondent from the Applicant No. 1 and other recipients as on 30.06.2017 and the new recipients who had made bookings post 01.07.2017 but prior to the issue of Completion Certificate on 12.02.2018, which had accrued to the Respondent was required to be passed on to the Applicant No. 1 and other flat buyers. He has also c....
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....irst written submissions on 07.05.2019 vide which he stated that the assumptions made and the criteria used by the DGAP to assess the profiteered amount was incorrect. He has also stated that Section 171 of the CGST Act, 2017 required that any reduction in the rate of tax on any supply of goods or services or the benefit of ITC should be passed on to the recipients by way of commensurate reduction in the prices by an assessee, which would require an exact calculation of the tax credit available and utilizable before introduction of GST and post introduction of GST and the resultant benefit should be computed to calculate the profiteered amount. He has further stated that in case of a real estate development company, there were multiple kinds of inputs some of which were eligible for ITC in the pre-GST regime, however post-GST, while many of the indirect taxes had been subsumed and ITC was available on inputs, there were constraints/conditions on utilizing the ITC especially when any excess ITC was not available as a refund. 25. also submitted that it was very difficult to calculate the ITC especially in respect of the pre-GST period as in the real estate business, while inputs w....
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....of Possession as well as the Applicant No. 1's ledger account to substantiate his claim. 28. The Respondent has also mentioned that as per the complaint, the Applicant No. I had demanded ITC benefit of Rs. 68,179/-, while as per the DGAP's Report, he had profiteered only Rs. 15,231/(including GST on the Base amount of Rs. 13,599/-) in respect of the Applicant No. I's unit and thus, he had passed on a much higher benefit than what the Applicant No. 1 was entitled to. 29. The Respondent has further mentioned that the construction of the project was nearing completion when the GST had come into force on 01.07.2017 and there was very little tax rate/ITC benefit which he had got as a result of the introduction of the GST. But still, he had given GST benefit of Rs. 7,97,97,359/- suo-moto to his customers including the Applicant No. 1, as a goodwill gesture before the filing of the complaint by the Applicant No. 1. 30. also submitted the summarized position of the GST benefit as calculated by the DGAP and what was passed on by him as under:- GST Benefit calculated by DGAP GST Benefit Passed on by the Respondent Excess benefit passed on 3,69,26,963 7,97,97,359 4,....
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....nefit not Due 80 21,32,47,473 Nil 520,192 Nil Nil Nil He has also submitted that the above recalculation was done on account of the actual amount of instalments falling due post introduction of GST. iv) In 68 cases where benefit was passed on, in respect of - (i) 56 cases, the benefit re-calculated by the Respondent was lower than what had been passed on already and in (ii) 12 cases the re-calculated amount was higher than the benefit passed on by Rs. 2,27,510/-. He has further summarised the same in the table given below:- No. of cases Total sale value Instalments post GST GST benefit as calculated by DGAP GST benefit re-calculated by the company on same formula* Benefit passed on Excess/ (short) benefit passed on to Customers Benefit Due, Short passed 12 4,39,83,830 1,64,57,740 5,69,828 4,46,071 2,18,561 (2,27,510) Benefit Due, Excess passed 56 16,04,85,817 1,18,84,346 14,96,420 3,22,116 6,12,499 2,90,383 He has....
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.... He has further contended that out of the 23 units where GST benefit was short/not passed on, 2 units had been subsequently cancelled in January 2019. These two units accounted for a short benefit of Rs. 2,40,092/- and after adjusting this, the balance amount of GST benefit short/not passed on to the buyers of 21 units amounted to Rs. 4,02,017/-only. 34. The Respondent has also stated that as per the DGAP's calculations, the total ITC available during July 2017 to August 2018 was Rs, 7,05,83,085/- and pro-rata to the unsold area of 3,04,142 sq. ft. an amount of Rs. 95,42,833/- should have been reversed out of the ITC. He has further stated that some of the costs against which the above ITC had accrued to him were directly related to the units sold during the period and not to all the units under construction. He has further re-computed the amount required to be reversed, which is given below:- (Amount in Rs.) - ITC as per DGAP report: 7,05,83,085 - Less: ITC on services directly related to sold units: 2,089,087 - Net ITC 68,493,998 - Amount to be reversed (13.52%): 9,260,389 He has claimed that post above adjustment, an amount of Rs. 92,60,389/- was....
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....n etc. These were categorised as 'Other Charges' and he had correctly charged 18% GST on these charges. 39. The Respondent has also pleaded that as per Section 15(2) of the CGST Act, 2017 any taxes, duties and cesses levied under any other statute other than GST were very much part of the value of supply on which GST was leviable. He has further pleaded that the GST law only eliminated the cascading effect of taxes subsumed in the GST and no other taxes. Since, the Labour Cess was not subsumed, thus it formed part of value of supply on which GST was correctly levied. 40. The Respondent has also cited the judgement of Delhi Metro Rail Corporation Limited v. Simplex Infrastructures Limited, passed in FAO (OS) 674/2010 & CM 1141/2011 on 26.08.2011, in which the Hon'ble High Court of Delhi after analysing the provisions of the Building and other Construction Workers Welfare Cess Act, 1996 had held that that the Cess could not be construed to be a tax, thus, the Labour Cess was correctly added by him to the value of supply for the purpose of levy of GST. 41 The Respondent has also stated that the Applicant No. I's claim that the maintenance charges up to Rs. 7,500/- per month s....
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....ed by DGAP (Rs.) GST benefit passed on by the Respondent (Rs.) Excess benefit passed on (Rs.) Mr. Varun Goyal (H-001) 146,699 649,494 502,795 Mr. Manoj Chaurasia (E-1203) 20,697 45,819 25,122 44. The Respondent has also submitted that he had passed on the GST benefit of Rs. 7.97 Crore to the flat buyers of the project in the present case. He has also furnished summary of the GST benefit as calculated by the DGAP and the amount passed on by him for different categories of flat buyers, in the table given below:- Category of flat buyers NO. of units Amount of Instalments post GST Profiteering amount as per DGAP Benefit passed on by the Company Excess benefit passed on Short/ No benefit passed Remarks No consideration received post GST 400 NIL NIL NIL NIL NIL No consideration received post GST 80 NIL 520,192 NIL NIL NIL In these 80 cases full Payment including Instalment have fallen due pre-GST Others-A 1054 1249,071,884 35,273,439 79,578, 798 45,723,954 NIL GST benefit recalculated on actual instalments falling due post GST Others-B 21 2....
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.... that slowdown in the construction industry with sales going down and the unwillingness of the banks to support the industry had led to a situation where the interest and other costs were rising and developers were not in a position to meet their commitments. He has therefore, argued that on the other hand inspite of market conditions and slow down, the Respondent had claimed passing of an amount of Rs. 7,97,97,359/- as GST benefit to his customers while the total ITC claimed by him during the GST period was only Rs. 7,05,83,085/-. He has also contended that it was surprising that the Respondent was yet to give physical possession of the flats even after the receipt of the Occupancy Certificate 15 months ago to 85% of the allottees. He has further contended that the Respondent was defaulting on statutory compliances, was not able to handover titles to 70% of the allottees and had been taken to the NCLT by his creditors on previous occasion and still he was claiming that he had paid full benefit of GST to the flat buyers. 49. The Applicant No. 1 has also submitted that the Respondent had also mentioned in his submissions dated 07.05.2019 that the discount was offered in 26 cases ....
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.... on to rest of the allottees as well as the Applicant No. 1. 50. The Applicant No. 1 has further contended that the Respondent has also requested this Authority to pass an order to enable him to recover the excess benefit amounting to Rs. 4,57,23,954/- passed on to his customers after adjusting the amount of ITC reversal, but since it was a goodwill gesture done suo moto by the Respondent and without any consideration, thus it could not be claimed back from the allotees. 51. The Applicant No. 1 has also argued that as per Annexure- 18 of the DGAP's Report dated 02.04.2019, the details of 1554 flats sold prior to the implementation of the GST were provided by the Respondent according to which an amount of Rs. 136,24,17,465/- was payable by the allottees of the project after implementation of the GST. The last instalment for the said project was raised on 27.02.2018 with the condition to make the payment within 30 days. However, as per the audited Cost Audit Report and the GSTR-3B returns, value of the outward taxable supplies from all the running projects was only Rs. thus, there seemed to be a mismatch between the figures available in the above Report/GSTR-3B returns and Anne....
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.... GSTR-3B and Cost Audit Report) 95,98,64,556 Ratio of ITC to Total Turnover/Post GST ITC upto date of completion/total turnover from flats booked till Completion Certificate) 18.29% Ratio of CENVAT to Total Turnover (as calculated by DGAP in its investigation report) 2.06% Benefit from additional ITC 16.23% 53. The Applicant No. 1 has also contended that the effect of reduction in prices of material consumed in the construction industry could also be ascertained from the abridged cost statement of the Respondent which showed that per unit rate of material consumed had come down from Rs. 36.01 per sq. ft. to Rs. 17.16 per sq. ft. in comparison to the year before implementation of the GST. Thus, as compared with the Cost Audit Report duly signed by the Respondent, there had been a reduction of around 10% in the Cement prices alone in comparison to the Pre-GST regime. He has further stated that w.e.f. 01.04.2019 a new scheme had been introduced whereby option had been given to the builders to either charge GST @ 12% on real estate projects (other than affordable housing) and take ITC or else charge 5% GST under composition scheme without any ITC benefit. The ab....
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....s earlier. Paragraph 6: Composite Supply The following composite supply shall be treated as supply of services, namely: (a) works contract as defined in clause (119) of Section 2; and (b) Works Contract: Section 2(119) defines it as "Works contract" means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration, or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some form) is involved in the execution of such contract. 56. The Applicant No. 1 has accordingly contended that it was decided in Advanced Ruling in the case of Bengal Peerless Housing Development Company Limited (GST AAR West Bengal) = 2019 (5) TMI 311 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL that all incidental services/facilities provided along with the principal supply should be treated as composite supply, construction service being the principal supply. He has therefore, pleaded that entire value of the composite supply was, therefore, to be treated, for the purpose of taxation, as supply of construction....
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.... a 'means' as well as an 'includes' clause. The 'means' clause of the definition stated that the value of supply of goods or service i.e. the transaction value should be the price actually paid or payable for the "said supply/' of goods or services. He has also claimed that the price was not defined under the CGST Act, 2017. He has further submitted various definitions of "Price" given by the Oxford Dictionary and the Webster's Encyclopaedic Unabridged Dictionary and stated that only such money consideration which was paid in return for the supply of the goods or services by the recipient would be includable in the transaction value. He has also cited the judgement of the Hon'ble Supreme Court passed in the case of Union of India v. Intercontinental Consultants & Technocrats (P) Ltd passed in Civil Appeal No. 2013 of 2014 and other connected matters on 07.03.2018 = 2018 (3) TMI 357 - SUPREME COURT and stated that in this case it was held that in valuation of taxable service, the value should be the gross amount charged by the service provider 'for such service' and the valuation could not be anything more or less than the consideration paid as quid pro quo for rendering such a serv....
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....whichever was more, had been handed over by way of sale, transfer or possession, provided the building had been completed along with all infrastructure services and Completion Certificate obtained from the local authority. In the present project, Completion Certificate had been issued to the Respondent on 12.02.2018 i.e. almost more than 15 months back and the Respondent was not able to handover the possession to even 20% of the owners though the RWA should have been formed almost a year back. Vide email dated 04.07.2019, the Applicant No. 1 has also alleged harassment from the Respondent stating that he was not giving him physical possession of the flat. 61. The Respondent has filed written submissions dated 08.07.2019 vide which he has replied the Applicant No. I's submissions dated 21.06.2019 in which he has stated that he had taken a single GST registration for his 5 projects in Noida which was duly intimated to the DGAP during the investigation and was also mentioned at Serial No.19 at page 6 of the DGAP's Report. He has therefore, claimed that the GST returns, thus would have consolidated numbers and not the break-up for each of the projects whereas the ITC amount of Rs. 7....
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....hus, the Applicant No. I's claim that the discount offered to the 26 buyers (booked under the special scheme) should have been offered to all other buyers also had no legal or commercial basis. The Respondent has further contended that the Applicant No. 1, on the one hand had referred to the amount of Rs. 136,24,17,465/- being the demand to be collected from the home buyers post the implementation of GST, as calculated and mentioned by the DGAP and on the other hand he had referred to an amount of Rs. 95,98,64,556/-, which was the value of the taxable supplies for all the projects of the Respondent for the period from April 1, 2017 to March 31, 2018. On this issue, the Respondent has also stated that one figure was for one project while the other was for his company as a whole i.e. for all the 5 projects and also the first figure was the balance value of 1557 flats sold prior to implementation of GST, while the second was the value of his taxable turnover for the period from April 1, 2017 to March 31,2018. Thus, the two figures were completely different. He has also reiterated his previous submission that the amount of Rs. 136.24 Crores included an amount of Rs. 8.15 Crores also in....
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....ase was per sq. ft. and thus, various cost items were divided over the total area constructed in the year in sq. ft. and per sq. ft. cost was arrived at for various heads. The Respondent has claimed that in the present case, the stage of the project was very important as the costs and the respective proportions kept changing with the stage of construction. He has claimed that in the initial stage, Steel might be a big component while at the finishing stage, there would probably be negligible portion of Steel but finishing items would be in large quantity. He has also claimed that this statement was for all the projects of the Respondent and the fact that material cost per sq. ft. had dropped from the previous year was a reflection of the stage of various projects and not the cost saving on account of GST or ITC, as had been wrongly alleged by the Applicant No. 1. The Respondent has also contended that the Applicant No. 1 has also referred to the Respondent's decision to opt for charging GST @ 12% with benefit of ITC with effect from April 1, 2019, which had no bearing on the past as that decision was based on the Respondents calculations for future projects. The Respondent has clai....
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....r the period from July 2017 to March 2018 while the DGAPs investigation covered the period of July, 2017 to August, 2018. b) That the turnover and ITC appearing in the returns was for more than one project, while the data considered by the DGAP was for the present project. The Respondent has thus submitted that the data provided by him to the DGAP was authentic and by no means frivolous. During the hearing held on 09.07.2019, the Applicant No. 1 had made another submission where he had tried to link the delay in his getting possession of flat to the application filed by him, however the Respondent has claimed that these two issues were not linked and there was a genuine delay in completing some small works in the flat and the physical possession of the flat had been handed over to the Applicant No. 1 on 11.07.2019 to his satisfaction. The Respondent has also furnished a copy of the Applicant No. I's letter dated 11.07.2019 regarding receipt of physical possession of the flat. 68. We have carefully considered the DGAP's Reports, submissions of the Respondent and the Applicant No. 1 and all other material placed on record and find that the Applicant No. 1 had booked a ....
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....in Table B and thus he has taken an amount of Rs. 6,10,40,252/- as the additional ITC benefit during the Post-GST period. 69. The DGAP as per Table D has further reported that the Respondent had not passed on the benefit of additional ITC of 2.42% and has in excess collected/profiteered an amount of Rs. 3,69,26,963/- from the house buyers which he was required to pass on to them. The DGAP has also intimated that the Respondent had profiteered an amount of Rs. 15,231/- from the Applicant No. 1 including the GST and an amount of Rs. 3,69,11,732/- (Total 3,69,26,963/-) from the rest of the house buyers which was required to be paid to both of them. The DGAP has further intimated that the Respondent had supplied the construction service in the State of Uttar Pradesh only. 70. The Respondent has claimed in his submissions that it was not possible to calculate the ITC in the real estate business as the benefit of ITC was available during the entire period of the construction however, the sale of the houses was not linked to it. However, this contention of the Respondent is not maintainable as he has completed construction of the project and has also obtained the Completion Certific....
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....ger account on 12.05.2018 of one Mr. Mohammad Najmuzzaman, who has been allotted unit No. A-005 in the above project by the Respondent, reads as "Receipt Ref. CNEM/00257/18-18) (98,715.00+Tax 11,846.00)" shows that no where it has been mentioned that this amount has been transferred on account of ITC benefit. Perusal of the copies of the ledger accounts of the other house buyers to whom the Respondent has claimed to have passed on the benefit of ITC shows that the same entry has been made in all such cases during the months of March to May 2018. By no stretch of imagination this entry can be construed to have been made on account of passing on the benefit of ITC. Apparently this entry has been made on account of the discount which the Respondent had offered to the buyers due to slump in the market. Therefore, the above amount cannot be taken to have been passed on account of the ITC benefit. The Respondent has also claimed that no profiteering had been calculated by the DGAP in respect of 400 buyers which is also not correct. Perusal of Annexure-18 attached with the Report of the DGAP shows that profiteering has not been computed in respect of 404 buyers only where in respect of 11....
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....ndent had charged GST on the maintenance charges as well the Labour Cess which he could not have charged as the maintenance charges up to the extent of Rs. 7500/- were exempt from the payment of GST as per the Notifications No. 12/2017-Central Tax (Rate) dated 28.06.2017 read with Notification No. 2/2018-Central Tax (Rate) dated 25.01.2018. In this connection it would be pertinent to mention that this Authority as per the provisions of Section 171 (1) of the CGST Act, 2017 has mandate to ensure that the benefit of tax reduction as well as of additional ITC is passed on to the recipients and has no jurisdiction to decide which rate of tax should be charged on a particular good or service or which of them should be construed to be part of the composite supply or what should be treated to be value of their taxable supply as per the provisions of section 15 of the above Act or which reimbursements did not fall under the term supply. If required the above Applicant may approach the appropriate assessing authority or the Authority on the Advance Rulings constituted under Chapter XVII of the CGST Act, 2017 to settle the above issues. He may also cite the judgements passed in the cases of ....
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..... However, this contention of the above Applicant is not admissible since he can get benefit only on the basis of the additional ITC which had become available to the Respondent. Any discount/benefit given by the Respondent out of his profit margin or due to cost reduction or on account of market conditions does not fall within the ambit of section 171 (1) of the above Act and the Respondent cannot be compelled to pay the same discount to the above Applicant. 80. The above Applicant has also raised objection on the value of the taxable supply claiming that there was mismatch in the figures mentioned in the Audited Cost Reports as well as the GSTR-3B returns and Annexure-18 of the Report. Perusal of the Report of the DGAP dated 09.07.2019 shows that the above Applicant had taken in to account the figures pertaining to the period from July, 2017 to March, 2018 whereas the DGAP had considered the data pertaining to the period from July, 2017 to August 2018. Therefore, there is bound to be mismatch in the figures taken in to consideration by the above Applicant and the above three statements and the objection raised on this ground in not maintainable. 81. The Applicant No, 1 has ....
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....ws that it includes extra charges realised from him by the Respondent on account of Labour Cess, non-taxable items, legal expenses and differential GST on Labour Cess. As mentioned supra determination of the all the additional charges does not lie within the jurisdiction of this Authority and hence the claim made by the above Applicant in this regard is not tenable. An amount of Rs. 33,716.00 which has been credited to his account by the Respondent on 01.04.2018 can also not be termed as the benefit of ITC as no such entry has been made in the ledger. Accordingly, the above Applicant is entitled to ITC benefit Rs. 15,231/- including the CST as has been rightly calculated by the DGAP at Sr. No. 96 of Annexure-18 of his Report. 85. Based on the above narration it can be concluded that the DGAP has correctly assessed the additional ITC ratio as 2.42% and by applying this ratio to the payments made on or after 01.07.2017, has also correctly computed the profiteered amount as Rs. 3,69,26,963/- as has been mentioned in Annexure-18 of the Report This amount also includes profiteered amount of Rs. 15,231/- to be paid to the Applicant No. 1 and Rs. to all the other 1152 buyers. 86. Ac....