TaxTMI 
TaxTMI 
2019 (12) TMI 586
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....cres', 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 Payment Schedule of both pre-GST & post-GST periods. c) Copy of t....
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....ss 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. (b) Copies of GSTR-3B returns for the period July, 2017 to August, 2018. (c) Copies of Tran-1. (d) Copies....
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....bsp; 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 of construction. The Respondent did not charge any Service Tax on the amount charged towards cost of land which was recovered in the pre-GST regime and charged Service Tax @ 6% (15% Service Tax on 40% of the cost of construction) in the pre-GST regime and GST @ 18% on the consideration received towards cost of construction which did not include the land value in the pre-GST & GST regimes. Further, the....
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.... 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 has observed that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail credit of Service Tax paid on input services and credit of VAT paid on the purchase of inputs. However, the CENVAT credit of Central Excise duty paid on inputs was not admissible as per the CENVAT Credit Rules, 2004, applicable at the material time. It was also noticed that the Respondent was not collecting VAT from his customers and discharging his output VAT ....
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....redit 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 of input tax credit, having not been passed on, were tabulated by the DGAP as in Table-'D' below. Table-'D' (Amount in Rs.) S.No. Particulars Pre-GST Post- GST 1. Period A April, 2016 to June 2017 July, 2017 to August, 2018 2. Output tax rate (%) B 6.00% 12.00% 3. Ratio of CENVAT/ Input Tax Credit to Taxable Turnover as per Table - D above (%) C 0.42% 3.89% 4. Increase in input tax credit availed post-GST (%) D=3.89% less 0.42% - 3.47% 5. Analysis of Increase in input tax credit: 6. Basic Price realise....
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....-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. 16. The DGAP has further stated that the Respondent had sold 119 flats out of which 90 home buyers had made payments in the post-GST period till 31.08.2018. The above profiteering had been computed in respect of those 90 flats where payments had been received in the post-GST period. The profiteering in respect of the remaining 29 home buyers would be calculated when payments would be received from them, by taking into account the benefit of proportionate input tax credit. 17. The DGAP has observed that the benefit of additional input tax credit of 3.47% of the turnover had, in fact, accrued to the Respondent and the same was required to be passed on to the Applicant and other recipients. Thus, the Respondent had contravened the provisions of Section 171 of the Central Goods and Serv....
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....istration 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, 13.04.2019, 20.05.2019 and 28.05.2019. The contentions raised by the Respondent vide above mentioned submissions are discussed in subsequent paras. 20. The Respondent in his written submissions referring to Para 15 and Table C of the DGAP report with reference to Sl. No. 5 - Particularly column E relates to Area sold relevant to turnover as 96,789 Sq.ft. has claimed that the area was 84,332 Sq.ft. only. As a result the modified figures were submitted by him as follows:- S.No. Particulars July 2017 to Aug 2018 6 Relevant CENVAT/ITC (F) = B*(E/D) = 2,58,17,372 * (84,332 / 2,55,800) 85,11,456 7 Ratio of CENVAT / ITC to TO [G = F/C] = 85,11,456 / 25,09,09,317 3.39 21. The Respondent has further submitted that the DGAP had ignored the Tamil Nadu VAT ITC which was available to him under the....
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....d 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, Table C would have been read as follows: S.No. Particulars July 2017 to Aug 2018 6 Relevant CENVAT/ITC (F) = A * (E/D) = (34,53,380+78,64,466) * (85,283 / 2,55,800) 37,73,338 7 Ratio of CENVAT / ITC to TO [G = F/C] = 37,73,338 / 27,33, 14,943 1.38% Whereas the report the above figure was mentioned as 0.42%. Thus, the additional ITC benefit has been reduced by 0.96% [1.38% Minus 0.42%]. 24. The Respondent has submitted that the Non-Taxable Land value was considered during Pre GST period unduly in the report. He referred to the Table C, entry shown at Sr. No. 3 which was Rs. 27,33,14,943 for pre GST period in which the land value was included in the above mentioned figure was as follows: Years Value of land included in the turnover figures mentioned in Report (in Rs) 2016-17 4,57,07,500 2017-18 (3 months) 1,46,10,800 6,03,18,300 He further a....
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....ble 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 CBIC. In the absence of legal sanction such workings may not have legal validity. Even if such reversible ITC was found, the report did not adjust the same against the eligible ITC of GST period in Table C and Table D. He further mentioned that the State GST officials had issued notice to him for possible reversal with different workings too with potential possibility to change the eligible ITC figure during the GST period considered in the Report. 27. In his submissions dated 13.04.2019, 20.05.2019 and 28.05.2019 the Respondent has reiterated the submissions which were made by him on 06.03.2019 and further added that he had distributed to his customers much more than the above mentioned GST ITC benefit by way of price reduction and also GST ITC benefits was passed to the customers. When the entire industry as well as his company was in great financial stress, he had done his business with utmost honesty and with due regard to the legal provisions in letter....
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.... Respondent dated 06.03.2019 were forwarded to the DGAP on 07.03.2019, during the hearing, for his Report. The DGAP vide his Report dated 27.03.2019 replied on the issues raised by the Respondent as follows: a) On the issue of the total area sold in the post-GST period, relevant to turnover which was erroneously taken as 96,789 sq. ft. instead of 84,332 sq. ft. the DGAP has replied that he had taken the actual total area of 96,789 sq. ft. as per the home buyer list submitted by the Respondent during the course of investigation and the same was also evident from Annexure-23 of the DGAP's report dated 14.02.2019. b) On the issue of the omission of Respondent's input tax credit of VAT available in the pre-GST period the DGAP has stated that this objection had already been addressed in the Para-15 of his report dated 14.02.2019. c) On the issue of non-taxable land value which had been considered during the pre-GST period the DGAP has replied that he had compared the total turnover (inclusive of land value) of the Respondent for the pre as well post-GST periods and the value of land was also included in post-GST turnover as the Respondent was paying GST at the effective rate of 12....
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....intimated that this amount of profiteering also included the profiteered amount of Rs. 33,972/- including 18% GST on the base amount of Rs. 28,790/- in respect of the Applicant No. 1. He has also supplied the details of all the buyers who have purchased flats from the Respondent along with their unit numbers and the profiteered amount vide Annexure-23 attached with the Report. 32. Further, we observe that the DGAP vide his reports dated 14.02.2019, 27.03.2019 and 1 1.06.2019 has addressed all the objections raised by the Respondent and the explanations given by the DGAP are correct and can be relied upon. Though some of the major contentions of the Respondent are discussed in subsequent paras. 33. We note that one of his prime contentions against the DGAP's report is that the credit of VAT paid on inputs has not been considered. We find that this claim of the Respondent is incorrect since though the Respondent had claimed credit of VAT paid on the inputs, but he had not discharged any output VAT liability. Further, Respondent also did not charged/paid VAT in the pre-GST period from the home-buyers. Thus, for determining the profiteering amount, neither the credit of VAT paid on t....