TaxTMI 
TaxTMI 
2019 (12) TMI 461
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....2019, has been received on 25.04.2019 from the Applicant No. 11, i.e. the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. Vide the above report, the DGAP has reported that the Andhra Pradesh State Screening Committee on Anti-profiteering had referred 09 applications to the Standing Committee on Anti-profiteering under Rule 128 of the CGST Rules, 2017, filed by the Applicants No. 1 to 9, alleging profiteering by the Respondent in respect of purchase of flats in the Respondent's project "The Celest" located in Vishakhapatnam. The Applicants No. 1 to 9 had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to them by way of commensurate reduction in price after implementation of GST w.e.f. 01.07.2017 and had charged GST on the pre-GST full amount of instalments. The Applicant No. 2 had also submitted copies of demand letters issued by the Respondent during the post-GST period Along with the application. 2. The Andhra Pradesh State Screening Committee on Anti-profiteering had examined the said applications and based on the submissions made during the p....
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.... of the completion certificate and further benefit (if any)/adjustment of the same would be made in his final demand note. On the basis of his preliminary calculation, the Respondent submitted that the preliminary benefit already passed on to the customers was likely to exceed the actual benefit that would be required to be passed on in accordance with Section 171 of the CGST Act, 2017. (ii) The Respondent submitted that discount on account of GST benefit @3% had been offered to all the home buyers. The Respondent submitted that on all demands raised post-GST, discount @3% of the gross demand value had been given to his home buyers. To support his claim, the Respondent submitted all demand notes issued to the above Applicants wherein the discount had been passed on. The gross value reported in the home buyers list post-GST was inclusive of the 3% discount. (iii) The Respondent, vide e-mail dated 19.12.2018, had provided the trail of e-mail communications with his various home buyers to substantiate his claim that 3% benefit on account of ITC had been passed on by him. (iv) The Respondent submitted that as per Real Estate Regulatory Authority (RERA) specif....
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.....2015 2,99,900 3. For Excution of Agreement - 10% 01.11.2015 4,99,900 42,930 10,42,730 4. On completion of Foundation -15% 12.09.2016 7,49,849 33,181 7,83,030 5. On casting of 3rd floor slab -12.5% 15.04.2017 6,24,874 28,119 6,52,993 6. On casting of 7th floor slab -12.5% + 50000 towards amenities charges 14.08.2017 6,74,874 83,984 7,58,858 7. On casting of 11th floor slab -10% 05.12.2017 4,99,454 59,934 5,59,388 8. On casting of top floor slab -12.5% 23.08.2018 6,24,874 53,989 68,506 6,39,391 9. On Completion of plastering - 12.5% 6,24,874 10. On Possession 5%+ Remaining Amenities Charges 3,39,950 Total 51,38,549 1,04,230 53,989 2,12,424 44,36,390 6. The DGAP in his Report has observed that the contention of the Respondent that on account of GST, he was already offering a dis....
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....ies". Section 17 (3) 'The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient was liable to pay tax on reverse charge basis, transactions in securities. sale of land and. subject to clause (b) of paragraph 5 of Schedule II, sale of building". Therefore. ITC pertaining to the unsold units might not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the net benefit of additional ITC available to him post-GST. 8. The D AP has further reported that Section 171 of CGST Act, 2017 which governs the anti-profiteering provisions under GST, reads as "Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices." Thus, the legal requirement was that in the event of benefit of ITC or reduction in rate of tax, there must be a commensurate reduction in prices of the goods or services. Moreover, the said Section 171 does not provide a supplier of goods or services any means of pass....
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...., 2017) was 4.39% and during the post-GST period (July, 2017 to October, 2018), it was 10.42% which confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 6.03% [10.42% (-) 4.39%] of the turnover. 11. The DGAP has also affirmed that the Central Government, on the recommendation of the GST Council, had levied 18% GST on construction service (after one third abatement towards cost of land, effective GST rate was 12% on the gross value), vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Accordingly, the profiteering had been examined by comparing the applicable tax and ITC available to the Respondent during for the pre-GST period (April, 2016 to June, 2017) when only Service Tax (c) 4.5% was payable with the post-GST period (July, 2017 to October, 2018) when the GST rate was 12% on the gross value. On the basis of the figures contained in table-'ft above, the comparative figures of rate of tax, ITC availed/available as a percentage of the turnover in the pre and post-GST periods, as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period, has been tabulated in Table- 'C....
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....t No. 1, mentioned at serial no. 218 of Annexure-15; Rs. 1,21,541/- (including GST on the base amount of Rs. 1,08,5191-) which was the profiteered amount in respect of the Applicant No. 2, mentioned at serial no. 187 of Annexure-15; Rs. 1,58,824/- (including GST on the base amount of Rs. 1,41,807/-) which was the profiteered amount in respect of the Applicant No. 3, mentioned at serial no, 41 of Annexure-15; Rs. 92,611/-(including GST on the base amount of Rs. 82,6891-) which was the profiteered amount in respect of the Applicant No. 4, mentioned at serial no. 154 of Annexure-15; Rs. 1,31,729/- (including GST on the base amount of Rs. 1,17,6150 which was the profiteered amount in respect of the Applicant No. 5, mentioned at serial no. 216 of Annexure-15; Rs. 97,148/- (including GST on the base amount of Rs. 86,7401-) which was the profiteered amount in respect of the Applicant No. 6, mentioned at serial no. 142 of Annexure-15; Rs. 1,42,691/- (including GST on the base amount of Rs. 1,27,402/-) which was the profiteered amount in respect of the Applicant No. 7, mentioned at serial no, 224 of Annexure-15; Rs. 1,11,160/- (including GST on the base amount of Rs. 99,2501-) which was the....
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....214 Further Benefit to be passed on as per Annex-15 6. Applicant 1 1625 14,38,468 97,148 43,154 53,994 Further Benefit to be passed on as per Annex-15 7. Applicant 1 1625 19,85,408 1,27,402 63,384 79,306 Further Benefit to be passed on as per Annex-15 8. Applicant 1 1625 22,23,499 1,50,166 66,705 83,641 Further Benefit to be passed on as per Annex-15 9. Applicant 1 1625 22,23,499 1,50,166 66,705 83,461 Further Benefit to be passed on as per Annex-15 10. Other Than Applicant 234 - 49,43,51,564 3,33,86,527 1,48,30,547 1,85,85,980 Further Benefit to be passed on as per Annex-15 Total 243 - 51,11,78,843 3,45,22,974 1,53,35,365 1,91,87,609 - 15. The DGAP has further claimed from the Table 'D' above that the benefit claimed to have been passed on by the Respondent (Rs. 1,53,35,365/-) was less than what he should have passed on to the home buyers (Rs. 3A5,22,974/-) including the Applicants (Sr. No. 1 to 9 of table D), by an amount of Rs. 1,91,87,609/-. The details of these amounts was given in Annexure-15 to the DGAP....
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....ented by Sh. P.K. Tyagi and Sh. Shivendu Pandey, Superintendents while the Respondent appeared on hearings on 24.05.2019, 18.06.2019, 25.06.2019, 04.07.2019, 22.07.2019, 23.08.2019 and 30.09.2019. The Applicants No. 3 to 9 were not present during the hearings. The Respondent has filed his submissions dated 23.05.2019, 18,06.2019, 24.06.2019, 02.07.2019, 05.08.2019, 19.07.2019, 27.09.2019 & 11.10.2019. 18. The Respondent in his submissions dated 23.05.2019 has stated that the Respondent was engaged in the business of development of mixed used projects comprising of residential apartments and retail mall, The Respondent had started development of the Project in Vishakhapatnam, Andhra Pradesh in the year 2015. The development of residential apartments and retail mall was integrated, on the lower 4 floors of a Tower retail mall was being built and on the higher floors residential apartments were being built as details given below: Particulars Details %age Saleable Carpet Area Residential portion 2,65,592 Sq. feet 76% Commercial portion 85,216 Sq. feet 24% Total 3,50,808 Sq. feet 100% Area Sold (up to 31st October 2018) Residential portion....
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.... Crores) 1. Residential area sold 2,40,235 143.36 2. Residential area unsold 25,357 17.65* 3. Commercial area 85,216 60.38* Total area of the project 3,50,808 221.39 *Estimated sale value of potion unsold had been computed basis the last sale prices of residential flats prevailing prior to October 2018 20. The Respondent has further elaborated two scenarios below: - Scenario 1 - Where value was taken as basis for allocating estimated input tax savings to be passed: - Proportion of input tax savings to be passed on to the existing customers: = Total Savings of the Project * Value of residential Area sold/ Value of total area of the project Input tax savings to be passed = Rs. 3.2 Crores X Rs. 143,36 Crores = Rs. 2.08 Crores Rs. 221.39 Crores Input tax savings to be passed on were allocated to the total sale price of the existing customers to compute the percentage benefit to be passed; Input tax savings to be passed/Sale value of portion sold under GST % benefit to be passed = Rs. 2 08 Crores./Rs. 77.2 Crores = 2.69% Scenario 2 - Where area was taken as basis for allocatin....
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....bove would be further reduced to the extent of above-mentioned issues. However, on a conservative basis, the Respondent had suo moto decided to pass on a benefit of 3% to the customers which amounted to Rs. 15,335,365/- (i.e. 3% of Rs. 5,11,178,843/-) till 31 October 2018, He has also submitted the details of customer-wise benefit passed on for all customers including the above Applicants. 21. The Respondent has further raised objections in the DGAP's Report and contended that the DGAP has considered incremental credit instead of blocked credit. The Respondent has submitted that the methodology adopted by the DGAP was not correct and has failed to consider the following aspects: a. The DGAP has done the analysis on the basis of the incremental credits arising out of the implementation of the GST and thereafter applied a percentage on the said credits as an anti-profiteering measure. b. The DGAP has merely done a comparison between the credits available in pre-GST with that was available post the implementation of the GST without analyzing the reasons. The actual reasons for the availability of such incremental credits were not looked into for arriving at the be....
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.... 100 Balance Sheet Liability Amt. Asset Amt. ITC 0 Balance Sheet Liability Amt. Asset Amt. ITC 18 23, The Respondent has claimed on the basis of the above Tables that that the credit of Rs. 10 which was earlier not available, was available post implementation of the GST. Further, due to the increase in tax rates, the amount of tax had increased from Rs. 10 to Rs. 18. Only the aforesaid two reasons were resulting into incremental credits in the GST regime, and the same should be looked into by the DGAP for computation of the benefits to be passed on to the customers. The Respondent has also argued that that the approach should be passing on of benefits of blocked credits of Rs. 10. The Respondent has worked out blocked credit pertaining to residential portion sold and estimated it ranging between Rs. 2.08 crores to Rs. 2.19 crores from July 01, 2017 till the completion of the project. Therefore, GST input credit benefit to be passed on was calculated less than 3%. Going with conservative approach, the Respondent has decided to pass on GST input credit benef....
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....the method adopted by him. Even where the methodology adopted by the DGAP was considered, the quantum of benefit should have been computed by comparing taxable value (i.e. turnover excluding GST) charged from customer instead of value including GST. The Respondent has also stated that GST amount collected on the differential base price cannot be construed as profiteering made by the Respondent as the same was duly deposited with the Government and not pocketed by the Respondent. However, the said Report deviated from the basic principal of unjust enrichment (as such tax was duly deposited to the Government) and have applied GST of 12% on the GST benefit amount required to be passed on to the customers. 26. The Respondent has also averred that the basis adopted by the DGAP for allocation of ITC between sold and unsold portion was incorrect. In absence of any prescribed methodology, the DGAP has considered project area as a basis to allocate ITC pertaining to sold and unsold portion of the project. The DGAP has computed "Relevant ITC' by drawing proportion of sold area vis-a-vis saleable area. This had been done for both pre-GST and post-GST regime. The Respondent has also submitt....
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....t tax on demands raised. No logical explanation has been provided by the DGAP in his Report for consideration of only a portion (i.e. April 2016 to June 2017) out of total project period. He has also stated that cenvat credit amounting to Rs. 1.55 Crores and Turnover amounting to Rs. 19.49 crones pertaining to period prior to April 2016 should have been considered while calculating the Pre-GST ITC ratio which has resulted into incorrect comparison of the credit. 28. The Respondent has also argued that cost incurred has no direct link with turnover and has stated that cost incurred on construction has no direct link with the turnover in case of Real Estate Industry. Typically, there was a wide gap between turnover (i.e. collection from customers) and construction cost at the beginning of the project and over the construction lifetime it narrowed which resulted in lower ITC to turnover percentage in the initial period and a higher ITC to turnover percentage in the later period. Thus, computation of benefit on the basis of percentage of ITC to Sales in the respective regime was not the correct methodology to compute the GST benefit. 29. In light of above discussions, the Respond....
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.... Recalibrated base price M=J*(1-H) 480,354,759 492,203,117 Add: GST @ 12% N=M*1.12 57,642,571 Commensurate demand price O=M+N 537,997,330 Profiteering amount as per DGAP P=L-O 34,522,974 Benefit amount (Recalibrated base price less revised base price) Q=M*(1-H) 18,975,726 Profiteering should be computed in comparison with base price and not base price plus taxes Less: Interim benefit already passed to customer R 15,335,365 15,335,365 Benefit to be passed on S=Q-R 19,187,609 3,640,360 Scenario 2 - Where area was taken as basis for allocation of ITC Particulars Reference As per DGAP's Report Post errors rectification Remarks Pre-GST Post-GST Pre-GST Post-GST Cenvat of Service Tax paid on input services A 21,784,314 37,284,314 Cenvat credit considered only for April 16-June 17, Cenvat credit ....
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.... 19,187,609 4,720,618 30. The Respondent has claimed that the computation of benefit on the basis of above methodology has already been stayed by the Hon'ble Delhi High Court. The Respondent has also submitted that similar methodology adopted in the case of M/s Pyramid Infratech Pvt. Ltd. = 2019 (3) TMI 149 - DELHI HIGH COURT was presently under review by the Hon'ble Delhi High Court and interim relief has been provided by applying stay on the order in question. He has also stated that the case was still under the process of review by the Hon'ble High Court and was likely to be heard in July 2019. 31. The Respondent has also contended that methodology adopted in the case of M/s Pyramid Infratech Pvt. Ltd. was not applicable in the present case. He has also submitted that the facts of M/s Pyramid Infratech Pvt. Ltd. were not identical to the present case. There were differences in the facts of the present case for various reasons, for example intention of the Respondent. In the above-mentioned case, the intention of the Respondent had always been to sell the property. However, the Respondent was not intending to sell all the property which wa....
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....lied upon a recent decision in the case of Abbott Healthcare Pvt. Ltd. vs Union of India & others in W.P. (C) No. 4213/2019 = 2019 (5) TMI 563 - DELHI HIGH COURT wherein the issue was constitutional validity of the anti-profiteering provisions given in the GST law. He has also claimed that the Hon'ble Delhi High Court has observed that there were similar petitions pending with the Court in the case of Hindustan Unilever Ltd vs Union of India = 2019 (1) TMI 1368 - DELHI HIGH COURT and Jubilant Foodworks Ltd. vs Union of India = 2019 (5) TMI 568 - DELHI HIGH COURT. Accordingly, the Hon'ble High Court stayed further proceedings against the supplier in the given case. The Respondent has also argued that the fundamental basis of the investigation was currently under scrutiny of the Hon'ble High Court. Accordingly, he has submitted that the present investigation against the Respondent should be either dropped or at least be kept in abeyance till the time constitutional validity of the Act is decided by the Hon'ble court. 33. The Respondent has further argued that no methodology or guidelines had been prescribed under GST laws to ascertain benefit to be passed. He has also stated that ....
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....y had been constituted to examine whether the supplier of goods and/or services have passed on the benefit of reduced GST rate or enhanced ITC by way of commensurate reduction in the price of goods and/or services so as to ensure that the consumer was protected from arbitrary price increase in the name of GST. The Respondent has also stated that the methodology for determining whether the tax payer has passed on the benefit of reduced rate of GST or increased ITC by way of commensurate reduction in prices was one of the essential ingredients of Section 171 of the CGST Act, 2017. In the absence of the aforesaid methodology, the entire proceedings would be a futile exercise. In this regard, he has relied upon the Apex Court decision in the case of CIT vs. B. C. Srinivasa Shetty (Commissioner of Income Tax v. B. C. Srinivasa Setty (1981) 128 ITR 294 (SC)) = 1981 (2) TMI 1 - SUPREME COURT, wherein, the question of imposition of tax on capital gains on the goodwill of a newly commenced business was involved. The Apex Court has held that the computation and charging provisions form the essence of any tax legislation and that the failure of the computation provision would automatically re....
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....healthy competition and equitable treatment. It should conform to the norms which were rational, informed with reasons and guided by public interest, etc. All these principles were inherent in the fundamental conception of Article 14. This was the mandate of Article 14 of the Constitution of India." 35. The Respondent has further argued that penalty provisions under Section 29, 122, 123, 124, 125, 126 & 127 of the CGST Act, 2017 read with Rule 21 and Rule 133 of the CGST Rules, 2017 proposed to be evoked against the Respondent were liable to be dropped. He has also stated that he was a law-abiding taxpayer and has not violated any provision under the law. The Respondent in good intent has already passed on the interim benefits to all customers to whom demand letters has been issued after the introduction of the GST. The Respondent was also committed to pass the same in all future demands to be issued. Further, the Respondent has also submitted that he would re-determine the benefit to be passed on at the time of completion of the project and accordingly, determine benefit to be passed on or adjust any benefit already passed on to the customers. He has also submitted that the Res....
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....kim High Court in the case of Shubh Enterprises vs Union of India = 2015 (10) TMI 2756 - SIKKIM HIGH COURT which was later affirmed by the Hon'ble Supreme Court. Therefore, he has submitted that invocation of penal provisions in the present case was incorrect to this extent. 36. The Respondent in his submissions dated 18.06.2019 in the response to the DGAP's supplementary Report dated 07.06.2019 and submissions dated 09.06.2019 & 10.06.2019 of the Applicants, has stated that unutilized CENVAT credit balance transitioned into GST credit had been appropriately considered as pre-GST credits. The Applicant has alleged that transitional credit of Rs. 72,59,350/- should not be considered as pre-GST credits. Accordingly, as per the Applicants, pre-GST credits should have been Rs. 1,45,24,964/- only (i.e. difference between Rs. 2,17,84314/- less Rs. 72,59,3501-). In this regard, the Respondent has submitted that the aforementioned transitional credit of Rs. 72,59,3501- related to Service tax balance which could not be utilized till 30.06.2017. However, the said amount was allowed to be carried forward as ITC on introduction of the GST. He has also submitted that this was a mere procedur....
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....ee on Anti-profiteering, Andhra Pradesh, with first complaint being filed on 5 January 2018. The Respondent has also submitted that he had suo-moto computed and decided to pass on preliminary benefit of 3% on the demands post implementation of the GST. In this regard, the Respondent has also sent out communications to his customers highlighting that interim relief of 3% had been passed to customers by way of reduction in prices. He has also submitted that such communication was sent in last week of December 2017 i.e. prior to the date of receipt of any complaint from the customers, which clearly indicated the law-abiding character and good intent of the Respondent. He has also submitted a copy of the email and communication. Even in the case of the above Applicants, the communication was sent by the Respondent on 22 December 2017 i.e. on the same day when the first complaint was filed. Also, it was submitted that the Respondent had no prior knowledge of the fact that the above Applicants would be filing a complaint before the State GST authorities. On the basis of the above, the Respondent has submitted that the allegation made by the Applicants that he (the Respondent) had come fo....
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....oth. Thus, transitional credit would not get covered under the ambit of "ITC" since it relates to sale, entry or manufacture of goods and not supply per se. On the basis of the above submissions, the Respondent has submitted that transitional credit cannot be said to be benefit of ITC under the above Act and thus, was not liable to be included as post-GST credit for the computations, unless specifically provided in the CGST Act, 2017. He has also submitted that proviso to Section 140(3) mandatorily required passing on benefit of transitional credit claimed under Form TRAN-2 (i.e. situations where no invoice was available to substantiate amount of duty paid) to the customers. However, there was no such requirement specifically provided in the CGST Act, 2017 for transitional credit claimed under Form TRAN-1. Thus, intention of the lawmakers was clear that there was no need for passing on benefit of transitional credit claimed under Form TRAN-1 to the customers. 39. The Respondent has also argued that the Applicants have considered incorrect amount of ITC of GST availed under post-GST regime in their submissions. The Applicants have considered Rs. 7,95,69,8261- as post-GST credi....
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....GST availed in post-CGST regime, i.e. Rs. 7,87,87,676/- instead of correct figure of Rs. 5,89,10,304/, The Respondent further averred that the breakup of the said amount of Rs. 7,87,87,676 has been provided below: Particular Amount as per Respondent Amount as per Applicants Total ITC of GST availed in post-GST regime 6,80,60,410 6,80,60,410 Add: Service tax credit carried forward under GST - 72,59,350 Add: Transitional credit of Excise/ VAT/ Entry Tax - 58,65,856 Less: Credit pertaining to Phase-II 91,50,106 23,97,940 Net amount 5,89,10,304 7,87,87,676 42. The Respondent has again reiterated his earlier stand and further stated on the issue of the transitional credit by referring to the relevant provisions allowing credit to be carried forward under GST and the same was reproduced below:- Rule (117) of the Central Goods & Services Tax Rules, 2017 (the CGST Rules') - Credit carried forward under GST "(1) Every registered person entitled to take credit of input tax under section 140 shall, within ninety days of the appointed day, submit a declaration electronically in FORM GST TRAN-1, duly signed, on the commo....
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....utations. 44. The Respondent has also contended that credit pertaining to Phase-II allowed as deduction from credit appearing in electronic credit ledger should have been Rs, 91,50,106/-. The Applicants have alleged that the Respondent had commenced Phase-II of the project from 1 May 2018 and it was not possible to incur any cost prior to commencement of the phase. The Applicants have also stated that only 50% of the ITC availed by the Respondent relating to Phase-II should be allowed as deduction from the total ITC appearing in the electronic credit ledger (i.e. having combined ITC of Phase-I and Phase-II) i.e. 50% of Rs. 47.95,8801- = Rs. 23,97,940/. In this regard, he has also submitted that the aforementioned allegation put forth by the Applicants was baseless. It was a well-known fact that there were various costs which were generally incurred prior to commencement of any phase of a project viz. excavation, designing, consultancy, approvals, etc. Thus, ignoring the actual ITC and putting an arbitrary percentage on the actual figures was grossly incorrect. He has also submitted that ITC pertaining to Phase-II was duly verified by the DGAP at the time of investigation and app....
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.... Total Turnover D 44,84,80,346 51,11,78,843 64,33,80,346 51,11,78,843 Pre-GST Turnover Cenvat credit considered only for April 16-June 17. Turnover up to March 16 amounting to Rs. 19.49 Cr. not considered Saleable area E 2,65,592 2,65,592 3,50,808 3,50,808 Sale Value (sold area) - Rs. 143.35 Cr Sale Value (seleable area)-Rs. 221.25 Sold area F 2,40,233 2,40,233 2,40,235 2,40,235 ITC relevant G=C*E/F 1,97,04,325 5,32,85,487 2,55,32,477 4,03,42,059 Ratio of ITC (Total Credit/Total Turnover) H=G/D 4.39% 10.42% 3.75% 7.89% Increase in ITC availed post GST I=Post GST H-Pre-GST H - 6.03% - 3.92% Ratio was liable to be revised considering errors highlighted above Total basic demand under GST J 51,11,78,843 51,11,78,843 GST Charged @ 12% ....
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....eason because of which he has not considered the commercial area was because no commercial area has been sold till date. In this regard, the Respondent has submitted that the reasoning provided by DGAP was completely irrational and inconsistent since the D AP itself has considered unsold residential portion in his computation but failed to consider the unsold commercial portion. Further, since the development of residential units and commercial units was integrated therefore there was a single GST registration/ ITC pool. It was submitted that exclusion of commercial portion would result in passing of GST benefit accruing to buyers of commercial units to residential units, which was grossly incorrect. Even at the time of hearing, the Applicants have accepted that total saleable area should include commercial portion and at least to this extent the computation should be revised. 48. The Respondent has further contended that even if it was assumed that the methodology adopted by the DGAP was correct, there were apparent errors in the computation as the DGAP has considered incorrect figures for his calculation. The Respondent has stated that the below mentioned figures should be tak....
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.... area. pre-GST ITC and pre-GST turnover from Apr 14 to Jun 17 (instead of Apr 16 to Jun 17) was considered Particulars Reference As per DGAP's Report Post errors rectification Pre-GST (Apr 16 to Jun 17) Post-GST (Jul 17 to Oct 18) Pre-GST (Apr 16 to Jun 17) Post-GST (Jul 17 to Oct 18) Cenvat of Service Tax paid on input services A 21,784,314 21,784,314 ITC of GST Availed B 58,910,304 58,910,304 Total Cenvat/ITC C=A+B 21,784,314 58,910,304 21,784,314 58,910,304 Total Turnover D 448,480,346 511,178,843 448,480,346 511,178,843 Saleable area E 265,592 265,592 350,808 350,808 Sold area F 240,233 240,233 240,233 240,233 ITC relevant G=C*E/F 19,704,325 53,285,487 14,917,878 40,341,723 Ratio of ITC (Total Credit/Total Turnover) H=G/D 4.39% 10.42% 3.33% 7.89% Increase in ITC availed post GST I=Post GST H-Pre-GST H ....
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.... (B) - - 4. Input Tax Credit of GST Availed (C) - 7,95,69,826 5. Total CENVAT/VAT/Input Tax Credit Available (D)=(A)+(B) or (C) 1,45,24,964 7,95,69,826 6. Total Turnover as per Rome Buyers List (E) 44,84,80,346 51,11,78,843 7. Total Saleable Area (in sq. ft.) (F) 2,65,592 2,65,592 8. Area Sold relevant to Turnover as per Home buyers List (G) 2,40,233 2,40,233 9. Relevant CENVAT/INPUT TAX CREDIT (H)=[(G)*(D)/(F)] 1,31,38,105 7,19,72,4116 10. % of CENVAT/ITC to Turnover [(J)=H/E*100 2.39 14.08 d. From the above re-worked figures the Respondent has not passed on ITC to the tune of 11.15% (14.08-2.93) as per observations in pars 18 of the said Report dated 24.04.2019. Based on the above reworked figures, the Table - 'C' of the said Report was reworked as follows: S.No. Particulars Total Total (Pre-GST) (Post-GST) 1 2 3 4 1. Output Tax Rate (A) 4.50% 12.00% 2. Ration of Cenvat /ITC as per Table-B (B) 2.93% 14.08% 3. Increase in Input tax Credit post GST (C) - 11.15% 4. Total....
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....GAP's Report. 52. The Applicants have filed further submissions dated 15.06.2019 which were here under: a. The Respondent had never come forward to give any ITC benefit of GST as claimed by him in his letter dated 24.05.2019. After a complaint was filed before GST Commissioner of Andhra Pradesh, the Respondent had come forward with the offer of 3% ITC benefit to be passed. b. that even the Respondent in his letter dated 24.05.2019, while questioning the methodology adopted by the DAP in his Report, accepted the fact that the credit under Andhra Pradesh VAT Act and CENVAT Credit of Inputs was not available and that was one of the major reasons for difference in credits pre-GST and post-CST. c. The Respondent had claimed input credit by way of "Transitional arrangements for inputs" in terms of Sub Section 6 of Section 140 of CGST Act, 2017 read with similar provision under APSGST Act, 2017 and the same was credited to his electronic credit ledger. d. The Respondent had availed the AP VAT and CENVAT credit of goods which were procured prior to GST and used by the Respondent for making taxable supplies post GST. Further, the Respondent had claimed....
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.... the ITC benefit. It was only due to proactive intervention of the Applicant No, 1 and some other home buyers that the Respondent was forced to pass on some benefit after writing to State Tax Commissioner. On 18.082017 letter to Mr. Mansh Karserija was sent by registered post, Again on 12.12.2017 letter to Mr. Mansh Karserija was given by hand and the complaint was filed before State GST Commissioner and Jt. Commissioner on 22.12.2017 and before State Screening Committee on 25,12,2017. Only after filing complaint to CGST State Commissioner and Jt. Commissioner of State Tax, Visakhapatnam, the Respondent has sent us email on 22.12.2017 with proposal to pass on ITC Benefit. They also stated that as evident from Table A of Report of the DGAP, the said benefit was passed on after December 2017, which clearly showed that the Respondent has neither came with clean hands before the Anti Profiteering Authority nor before the Committee and was trying to camouflage the facts to suit their requirements as being done with applicants. c. The ITC shown in post-GBT period in Table 'B' of the Report of the DGAP was not in agreement with Returns filed by the Respondent and require certain ....
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.... 'B' & 'C' of DGAP's Report below for reconsideration:- Table 'B' (Amount in Rs.) Sl.No. Particulars Total Total (Pre-GST) (Post-GST) 1. 2 3 4 1. CENVAT of Service Tax paid on Input Services (A) 3,00,24,964 - 2. Credit of VAT paid on Purchases of Inputs (B) - - 4. Input Tax Credit of GST Availed (C) - 7,87,87,676 5. Total CENVAT/VAT/Input Tax Credit Available (D) = A+B or C 3,00,24,964 7,87,87,676 6. Total Turnover as per Home Buyers List (E) 64,33,80,346 51,11,78,843 7. Total Saleable Area (in Sq. Fts) (F) 3,50,808 3,50,808 8. Area Sold relevant to Turnover as per home buyers List (G) 2,40,233 2,40,233 9. Relevant CENVAT / Input Tax Credit (H)=(G)*D/F 2,05,61,068 5,39,53,729 10. % of CENVAT / ITC to Turnover H/E*100 3.2 10.55 Table 'C' (Amount in Rs.) Sl.No. Particulars Total Total (Pre-GST) (Post-GST) 1. 2 3 4 1. Output Tax Rate (A) 4.50% 12.00% 2. Ration of CENVAT / ITC as per Table - B (B) 3.20% 10.55%....
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....ded from the profiteered amount, contrary to the method adopted by the DGAP. 56. The DGAP in his supplementary Report dated 22.08.2019 and 04,09,2019 has stated that pre-GST period should have been taken from May, 2015 to June, 2017, whereas the DGAP has taken the period from April, 2016 to June, 2017, The DGAP has also contended that he has considered a uniform pre-GST period from April, 201 to June, 2017 across all the investigations relating to the Real Estate sector. The DGAP has also stated that he has taken the residential area as the total saleable area and not considered the commercial area. The factual information submitted by the Respondent was as follows:- Total residential area: 2, 65,592 sq. ft. Total commercial area (as claimed by the Respondent): 85,216 sq. ft. Total area (as claimed by the Respondent): 3,50,808 sq. ft. 57. The DGAP has also submitted that as per the details of the buyers submitted by the Respondent, he has sold only the residential portion of the project and no commercial unit has been sold by the Respondent during or before the period of investigation considered by the DGAP. Apparently, there was no turnover from the commerc....
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....d that the Respondent has contended that the Authority has not prescribed methodology for calculation of profiteering and consequently the DGAP has followed a methodology that was questionable and erroneous. In this regard, we observe that the profiteering has to be determined on cases to case basis. by adopting the most appropriate and accurate method based on the facts and circumstances of each case as well as the nature of the goods and services supplied. We reiterate that there cannot be any fixed mathematical formulations/methodology for determination of the quantum of benefit to be passed on which could cover different sectors of the economy and that each case has to be decided based on its specific facts. In this case, for calculation of profiteering, the increase in the ITC as a percentage of total taxable turnover has been taken by the DGAP and we do not find anything incorrect therein, C. The Respondent has also argued that pre-GST period should have been taken from May, 2015 to June, 2017, whereas the DGAP has taken the period from April, 2016 to June, 2017, The DGAP has contended that he has considered a uniform pre- BT period from April, 2016 to June, 2017 acr....
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.... and Rs. 5,32,85,4871- during the post-GST period (c)4.32% and 10.42% of the turnover respectively during the above periods which has resulted in additional ITC benefit of 6.03% of the turnover to him which he is bound to pass on. G. The Respondent has also contended that he was not in agreement with the computation of the profiteered amount made by the DGAP as it included the GST which had been deposited by him in the Govt. account. The plea taken by the Respondent on this ground is fallacious as by forcing the flat buyers to pay more price by not releasing the benefit of additional ITC and by collecting tax @12% on this additional realisation he has denied the benefit of additional ITC to them by not reducing the prices of the flats commensurately. Had he not collected additional GST the buyers would have paid less price and by doing so he has denied them the benefit of additional ITC which amounts to violation of Section 171 of the above Act. Both the Central as well as the State Government had no intention of collecting the additional GST as they had forfeited their revenue in favour of the flat buyers to provide them accommodation at affordable prices and by compellin....
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....rate reduction or ITC benefit is passed on to the eligible customers on account of GST implementation. It has nowhere acted as price regulator but has worked in interest of consumers. Further, the cases cited by the Respondent in support are still under review in the High Court so his argument is untenable. K. The Respondent has further argued that no methodology or guidelines have been prescribed under GST laws to ascertain benefit to be passed. In the absence of the aforesaid methodology, the entire proceedings would be a futile exercise and there was no machinery for assessment of tax. In this regard, he has relied upon the Apex Court's decision in the case of CIT vs. B. C. Srinivasa Shetty and he has also cited other cases viz. K.T. Moopil Nair vs. State of Kerala; Rai Ramkrishna vs. State of Bihar; State of A.P. vs. Nalla Raja Reddy; Vishnu Dayal Mahendra Pal vs. State of UP.; and D.G. Lose and Co. (Agents) (P) Ltd. vs. State of Kerala in his defence. We find the contention of the Respondent wrong and incorrect as the Authority has notified the Methodology and Procedure vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017 which was also made a....
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....ed on) in respect of all 243 home-buyers (including Applicants No. 1 to 9) came to Rs. 1,91 However, this claim of the DGAP cannot be considered as the Respondent's claim of passing of the ITC benefit suo moto has to be verified from the Applicants and not from the demand letters which he had submitted to the DGAP during the time of investigation. Therefore, the DGAP is directed to verify the above claims of the Respondents with conclusive evidence like affidavit from the Applicants or credit notes issued to the recipients. However, this Authority is in agreement with the DGAP's calculations as mentioned in Annexure 15 of his Report. Thus, based on the above facts this Authority determines the profiteered amount as Rs. 3,45,22,974/- which includes GST @12% on the base profiteered amount of Rs. 3,08,24,084/- realized from 243 out of total 267 residential units for the period w.e.f. 01.072017 to 31.10.2018 as per the Annexure- 15 of the Report., including the above Applicants. 62. It was established from the perusal of the above facts of the case that the provisions of Section 171 of the CGST Act, 2017 had been contravened by the Respondent as he had profiteered an amount ....