TaxTMI 
TaxTMI 
2019 (12) TMI 586
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....of Flat in the Respondent's project 'Bounty Acres', Unit No 3-406, Block-3, Bounty Acres, Kovilambakkam, Chennai, Tamil Nadu 600091. The above Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by him by way of commensurate reduction in the price of the above flat. The Tamil Nadu State Screening Committee on Anti-profiteering had examined the said application and upon being satisfied that the Respondent had contravened the provisions of Section 171 of the Central Goods and Services Tax Act, 2017, forwarded the same with its recommendation to the Standing Committee on Anti-profiteering on 29.06.2018 for further action, in terms of Rule 128 of the Central Goods and Services Tax Rules, 2017. The aforesaid reference was considered by the Standing Committee on Anti-profiteering, in its meeting held on 07th & 08th August 2018, wherein it was decided to forward the same to the DGAP to conduct detailed investigation as per the provisions of Rule 129 (1) of the CGST Rules, 2017. 2. The Applicant had furnished the following documents along with his application:- a) Duly filled in Form APAF-1. b) Copies of Paymen....
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.... period. Thus, there was no case of deducting 1/3rd value (in lieu of land) from the gross value (land price plus construction price) and paying GST @ 18% on such balance 2/3rd value (effective GST @ 12%). He further submitted that if he had claimed abatement of 1/3rd value of his construction receipt during GST regime, it would have been improper since the entire consideration was related to construction only and therefore, GST collected @ 18% on the construction value was remitted to the Government account. b) That the Respondent had requested to consider his Tamil Nadu VAT ITC which was available to him under the erstwhile law, while comparing the ITC benefit of pre-GST and post-GST periods. He had opted to pay TNVAT and had been permitted to collect VAT as well as avail the ITC of VAT on input materials purchased. c) That he had substantially reduced the price of the apartments sold by him in the post-GST period. 6. The Respondent had also submitted the following documents/information to the DGAP vide his above mentioned letters/e-mails during the course of the investigation:- (a) Copies of GSTR-1 returns for the period July, 2017 to August, 2018. ....
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.... 27,330 5,15,370 5. 10% of BSP on Completion of Roof Slab 02-11-2016 10% 4,88,040 29,282 5,17,332 6. 10% BSP on Completion of Brick work 27-03-2017 10% 4,88,040 29,282 5,17,332 7. 10% BSP on Completion of Plastering work 13-11-2017 10% 4,88,040 87,847 5,75,887 8. 7% of BSP on Completion of Floor Finishing Work 12-03-2018 7% 3,41,628 61,493 4,03,121 9. 3% of BSP on Completion of Handing over+CorpusFund+MaintenanceCost 01-10-2018 3% 1,46,412 54,880 36,233 2,37,525 Total 100% 48,80,400 5,03,880 1,97,100 11,90,000 1,81,050 1,85,573 71,38,003 9. The DGAP has further stated that 18% GST charged by the Respondent on construction value of the flat booked in the pre-GST regime was correct since the Respondent had made two Agreements with the Applicant while selling the flat, one for the cost of land and the other for the cost....
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....f land and, subject to clause (b) of paragraph 5 of Schedule Il, sale of building. Since the Respondent's aforesaid project was completed and the Completion Certificate had been obtained on 08.05.2018, the proportionate input tax credit pertaining to the unsold units was required to be reversed on 08.05.2018 and the computation of the same was furnished as in Table-B below.- Table- 'B' (Amount in Rs.) Particulars Factor Amount Total Saleable Area of Flats (in sq. ft.) A 2,55,800 Area Sold before completion certificate is obtained (in sq. ft.) B 1,31,387 Area sold before completion certificate is obtained (in Percentage) C=B/A 51.36% Area remaining unsold when completion certificate is obtained (in sq. ft.) D=A-B 1,24,413 Area remaining unsold when completion certificate is obtained (in Percentage) E=D/A 48.64% ITC available for the period between July, 2017 till August, 2018 as per GSTR-3B (in Rs.) F 2,58,17,372 Proportionate ITC to be reversed (in Rs.) G=F*E 1,25,56,750 Input Tax Credit availed post GST pertaining to sold units (in Rs.) H=F-G 1,32,60,622 11. Further, the DGAP h....
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....DGAP has submitted from the above Table-'C' that the input tax credit as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 0.42% and during the post-GST period (July, 2017 to August, 2018), it was 3.89%. This clearly confirmed that post-GST, the Respondent had benefited from additional input tax credit to the tune of 3.47% [3.89% (-) 0.42%] of the turnover. 13. Accordingly, the matter of profiteering had been examined by the DGAP by comparing the applicable tax rate and input tax credit available for the pre-GST period (April,2016 to June, 2017) when Service Tax @ 6% was payable with the post-GST period (July, 2017 to August, 2018) when the effective GST rate was 12% or 8% (GST @18% or 12% alongwith 1/3rd abatement on value) on construction service, vide Notification No. 11/2017-Central Tax (Rate), dated 28.06.2017 and Notification No. 01/2018-Central Tax (Rate), dated 25.01.2018. On the basis of the figures contained in Table-'C' above, the comparative figures of input tax credit availed/available during the pre-GST period and the post-GST period and the excess collection as a result of the benefit ....
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....urnover should have been resulted in commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the Central Goods and Services Tax Act, 2017, the benefit of the additional input tax credit was required to be passed on to the recipients. 15. Further, on the basis of the aforesaid CENVAT/input tax credit availability pre and post-GST and the details of the amount collected by the Respondent from the Applicant and other home buyers during the period 01.07.2017 to 31.08.2018, the amount of benefit of input tax credit not passed on or in other words, the profiteered amount has been quantified by the DGAP as Rs. 97,40,448/- which included GST @ 18%, 12% & 8%, on the base profited amount of Rs. 87,06,553/-. The home buyer and unit no. wise break-up of this amount has been given in Annexure-23 of the DGAP report. This amount was inclusive of Rs. 33,972/- (including GST @18% on the base amount of Rs. 28,790/-) which was the profiteered amount in respect of the Applicant, mentioned at serial no. 17 of Annxesure-23 of the DGAP report. It was also observed that the Respondent had supplied the construction services in the State of Tamil Nadu only....
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....quiring that "a 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", had been contravened by the Respondent in the present case. 19. The above Report was considered by the Authority in its meeting held on 21.02.2019 and it was decided that the Applicants and the Respondent be asked to appear before the Authority on 07.03.2019. The Respondent was issued notice on 21.02.2019 to explain why the above Report of the DGAP should not be accepted and his liability for violating the provisions of Section 171 of the CGST Act, 2017 should not be fixed along with imposition of penalty as per Section 122-127 of the above Act read with Rule 21 & 133 of the CGST Rules, 2017 and his registration under the above Act should also not be cancelled. During the course of the hearings no one appeared for the Applicant No. 1, the DGAP was represented by Smt. Gayatri, Deputy Commissioner and Sh. R. A. Rajneesh, Asst. Commissioner and the Respondent was represented by Sh. Prasanna Krishnan, CA & Sh. I.V. Krishna, CA. The Respondent has filed his written submissions on 06.03.2019, 13.....
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.... a) that he enjoyed the legitimate VAT ITC benefit during Pre GST period. b) that his VAT returns explicitly evidence such benefit. c) that he was permitted by TNVAT Act, 2016 to follow VAT inclusive price method and pay VAT by offering Purchase Plus estimated Gross Profit (to ensure that VAT was fairly levied on material component only and not on service portion of consideration). However, an observation sans legal sanction as well as logic, was made in the report that if the turnover disclosed in VAT return did not match, VAT ITC taken (though explicitly available in the VAT returns) should not be considered for profiteering analysis. In works contract industry, expecting material turnover to match with the gross turnover (material plus service) was quite vexatious and unfair. Under the above mentioned situation, it shall be unlawful and unfair to ignore the VAT ITC value while doing a comparison between ITC benefit during pre GST period and ITC benefit during the GST period. 23. The Respondent has further submitted that an amount of Rs. 78 lakh had totally been ignored in the report while computing the pre GST ITC. If the same had been considered, Tab....
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....riod. 25. The Respondent has submitted that there had been cases of direct reduction in his prices to pass on the benefit of GST ITC much more than the actual ITC benefit that he had gained. Such bona fide action from his side could not simply be brushed away by stating that there was some other commercial reason for reducing the price. He further added that the Authority shall certainly and positively consider his genuine request in the interest of natural justice and drop further proceedings against him. 26. The Respondent has referred the Para 14 of the DGAP report which showed some calculations in respect of GST ITC reversal. The report was referring to Section 17 (3) of the Act fairly which reads as follows: "The value of exempt supply under sub section 2 shall be such as may be prescribed..." The Respondent has submitted that what was the prescription of statute in this regard while at the time of taking GST ITC it was perfectly eligible credit only. The report did not throw any light on the legal sanction used in the methodology uniquely followed by the DGAP without referring to any statutory prescription provided by Rules or any notification issued by the ....
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....sp; 85,283 96,789 6. Relevant CENVAT/Input Tax Credit (F) = [(A)*(E)/(D)] or [(B)*(E)/(D)] 37,61,865 97,68,716 7. Ratio of CENVAT / Input Tax Credit to Turnover [(G) = (F) / (C)] 1.77% 3.89% Difference (Post GST ITC ratio minus Pre GST ITC ratio) 2.13% 97.87% Table D (Revised*) 21 Commensurate Demand Price (Recalibration factor = 96.53%) - As per DGAP report 27,09,64,109 Revised 21 Revised Commensurate Demand Price (Recalibration factor = 97.87%) --- T 27,47,25,550 22 Revised (Alleged) Excess Collection of Demand or Profiteered Amount [U = M-T = 28,07,04,557-27,47,25,550] 59,79,007 29. In his submissions dated 28.07.2019 the Respondent has reiterated the submissions which were made by him earlier. Further the Respondent has submitted vide Annexure-2 of the submissions that he had duly passed on ITC benefit of an amount of Rs. 92,38,515/- (Rs. 65,41,634 upto 01.08.2018 and Rs. 26,96,881/- after 01.08.2018 till the date of submissions) to the eligible customers. 30. The submissions of the Respondent dated ....
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....ailing ITC on the purchase of the inputs at higher rates of GST which had resulted in benefit of additional ITC to him and was also charging GST from him @12%. The above complaint was investigated by the DGAP and vide his Report dated 15.02.2019, he has found that the ITC as a percentage of the total turnover which was available to the Respondent during the pre GST period was 0.42% and during the post GST period the ratio was 3.89% as per the Table C mentioned above and therefore, the Respondent had benefited from additional ITC to the tune of 3.47% (3.89% - 0.42%) of the total turnover which he was required to pass on to the flat buyers of this project. The DGAP has also found that the Respondent has not reduced the basic prices of his flats by 3.47% due to additional benefit of ITC and by charging GST at the increased rate of 12% on the pre GST basic price, he has contravened the provisions of Section 171 of the CGST Act, 2017. The DGAP has further submitted that the amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount came to Rs. 97,40,448/- which included GST (@ 18%, 12%, 8%) on the basic profiteered amount of Rs. 87,06,553/-. The DG....
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.... hence the above claim of the Respondent cannot be accepted. 36. We find that it is established from the perusal of the above facts that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has profiteered an amount of Rs. 97,40,448/- inclusive of GST 18%, 12%, 8%) on the base profiteered amount of Rs. 87,06,553/-. Further, the Respondent has realized an additional amount of Rs. 33,972/- which includes both the profiteered amount @3.47% of the taxable amount (base price) and 18% GST on the said profiteered amount from the Applicant No. 1. Further, he has realized an additional amount of Rs. 97,06,476/- which includes both the profiteered amount @3.47% of the taxable amount (base price) and GST (@ 18%, 12% 8%) on the said profiteered amount from the flat buyers other than the Applicants in the present proceedings as per Annexure-23 of the Report. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on this amount of Rs. 97,40,448/along with interest @18% per annum to these flat buyers from the dates from which the above amount was collected by him from these buyers till t....