TaxTMI 
TaxTMI 
2020 (1) TMI 306
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....ed to profiteering in respect of supply of construction services related to the purchase of the apartments in his project "Supertech Basera" and had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the prices of the apartments purchased by them, on implementation of the GST w.e.f. 01.07.2017. The said applications were examined by the Haryana State Screening Committee in its meeting and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 (1) of the CGST Act, 2017, had forwarded the same with its recommendation to the Standing Committee on Anti-Profiteering for further action in terms of Rule 128 (2) of the CGST Rules, 2017. The said applications were examined by the Standing Committee on Anti-Profiteering in its meeting held on 27.12.2018 and it had referred the applications to the DGAP for investigation under Rule 129 (1) of the CGST Rules, 2017 to determine whether the benefits of reduction in the rate of tax or ITC had been passed on by the Respondent to his recipients. 2. The Standing Committee on Anti-Profiteering had examined two other similar ref....
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.... 01.07.2017 c. The benefit of ITC claimed in TRAN-1 statement had not been accepted by the GST authorities due to some technical glitch for which he had been running from pillar to post and had filed a Writ Petition before the Hon'ble Punjab & Haryana High Court. 6. The DGAP in his Report has further stated that vide the aforesaid letters, the Respondent had submitted the following documents/information:- a. As the GSTR-1 & GSTR-3B Returns were not filed due to technical glitch, he had submitted a summary of the sales details for the period of July, 2017 to January, 2019. b. Service Tax and VAT Returns for the period from April, 2016 to June, 2017. c. Allotment letters issued to the Applicants. d. CENVAT Credit Register for the F.Y. 2016-17, 2017-18 and from April, 2018 to January, 2019 e. Applicable tax rates, pre-GST and post-GST. f. Balance Sheets for the F.Y. 2016-17 and 2017-18. g. Copy of RERA Report. h. List of all the home buyers of the project "Supertech Basera". 7. The DGAP in his report has further stated that various replies of the Respondent and the documents/evidences on recor....
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....TC pertaining to the residential units which were under construction but not sold was provisional ITC which might be required to be reversed by the Respondent, if such units remained unsold at the time of issue of the completion certificate, in terms of Section 17 (2) & Section 17 (3) of the Central Goods and Services Tax Act, 2017, which read as under:- Section 17 (2):- "Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. 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 is 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, the ITC pertaining to the unsold units may not fall....
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....1,10,400 -- -- 11,10,400 9. Area sold relevant to turnover (I) 10,01,912 (Residential) + 9,008 (Commercial) 9,61,566 (Residential) + 4,311 (Commercial) 9,65,877 10. ITC relevant to Area Sold (J) =C or D*I/H - - - 3,03,98,556 11. Ratio of CENVAT/ Input Tax Credit of GST to Turnover (K) = J/G*100 0.00% 2.68% 11. The DGAP has also claimed that as per the Table-B, the ITC as a percentage of the total turnover (as per the home buyer's list) that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 'NIL' and during the post-GST period (July-2017 to December, 2018), it was 2.68%. This clearly confirmed that post-GST, the Respondent had been benefited from additional ITC to the tune of 2.68% (2.68% (-) 0%) of the turnover. The DGAP has further claimed that the Central Government, on the recommendation of the GST Council, has levied 18% GST (effective rate was 12% in view of 1/31d abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate on construction service in respect of affordable an....
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....d have resulted in commensurate reduction in the base prices. Hence, provisions of Section 171 (1) of the CGST Act, 2017 had been contravened, as the Respondent had not passed on the benefit of the additional ITC to the recipients by way of commensurate reduction in prices. 13. The DGAP in his report has also contended that the next issue to be examined was the amount of profiteering made in this case. On the basis of aforesaid CENVAT/ITC availability in pre-GST and post-GST periods and the amount collected by the Respondent from the Applicant No. 1 to 8 and other buyers of the flats and commercial shops during the period from 01.07.2017 to 24.01.2018, the amount of benefit of ITC that needed to be passed on by the Respondent to the recipients or in other words, the profiteered amount came to Rs. 1,17,34,498/- for residential flats and commercial shops, which included 12% GST on the base profiteered amount of Rs. 1,04,77,230/-. Further, the amount of benefit of ITC that needed to be passed on by the Respondent to the recipients or in other words, the profiteered amount during the period from 25.01.2018 to 31.12.2018, came to Rs. 2,12,60,195/- for residential flats which included....
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....cluding GST) from the Applicant No. 1 to 8, which included both the profiteered amount @ 2.68% of the base price and GST on the said profiteered amount. He has further stated that the investigation revealed that the Respondent had also realized an additional amount of Rs. 2,98,30,299/- which included both the profiteered amount @ 2.68% of the base price and GST on the said profiteered amount, from 1768 other recipients who were not the Applicants in the present proceedings. These recipients were identifiable as the Respondent had provided their names and addresses along with Unit Nos. allotted to them. Therefore, this additional amount of Rs. 2,98,30,299/- was required to be returned to such eligible recipients. 17. It has also been intimated by the DGAP that the present investigation covered the period from 01.07.2017 to 31.12.2018. Profiteering, if any, for the period post December, 2018, has not been examined by him as the exact quantum of ITC that would be available to the Respondent in future could not be determined at this stage, when the construction of the project was yet to be completed. The DGAP has further intimated that as the Respondent had failed to submit the copi....
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....he following documents:- i. Statement of ITC/CENVAT Credit availed and Turnover for the period from 01.04.2016 to 31.12.2018. ii. List of all payments received by the customers and ITC benefit passed on to the customers on 06.08.2019. iii. Balance Sheets for the period from 2016-17 to 20174-18. iv. Ledger copies of customers. v. Details of the total number of Residential/Commercial units with area. vi. Copy of voucher of CENVAT Credit reversal. vii. Copy of land purchase agreement. 21. The Respondent vide the above submissions has also stated that:- a. He has reversed balance ITC amounting to Rs. 1,62,78,213/- as on 31.03.2019. b. He has also disbursed an amount of Rs. 3,32,61,809/- to the 1976 customers. c. The DGAP in his report had not considered the reversal of Rs. 1,62,78,213/-. Therefore, he requested to adjust the amount of CENVAT credit reversal and claimed that the actual profiteering amount should be Rs. 1,69,83,596/-. d. He also requested to consider all the details upto 31.03.2019. 22. The Respondent vide his submissions dated 17.09.2019 has also furnished the ....
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....ssing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP's Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 0% and during the post-GST period (July-2017 to December-2018), it was 2.68%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 2.68% (2.68%-0%) of his turnover and the same was required to be passed on to the Applicant No. 1 to 8 and the other flat buyers. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as Rs. 3,32,61,809/- which was availed by the Respondent vide Table- C Supra on the basis of the information supplied by the Respondent, which the Respondent has not challenged and hence the amount of profite....
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....2 of the CGST Rules, 2017 lays down the mode of computation of mandatory reversal of the unutilized input tax credits in respect of unsold flats/shops of a real estate project at the time of receipt of completion/ occupancy certificate or on the date of first occupancy, whichever is earlier. This is the only method prescribed for reversal of ITC under the CGST Rules and the same requires that such reversal is effected only after the date on which completion/ occupancy certificate has been issued or from the date of first occupancy, whichever is earlier. In this case, however, the Respondent has affected reversal much before the above dates and hence the said reversal by the respondent has to be viewed as an act that was carried out with the mala-fide intent of denying the passage of benefit of ITC to his customers/ homebuyers. It is also a fact that at the time of reversal a number of units were yet to be sold and occupancy certificate has not yet been received which implies that this act of reversal was not only premature on the part of the Respondent but apparently also an afterthought aimed at avoiding the passing on of the benefit of ITC to his customers/ homebuyers. It would a....
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....red by the Respondent from the Applicant No. 1 to 8 and other flat buyers which is required to be refunded to the above Applicant No. 1 to 8 and the other flat buyers as per the Annexure-20 of the DGAP Report dated 02.07.2019 alongwith interest @18% from the date from when the above amount was profiteered by him till the date of payment as per the provisions of Rule 133 (3) (b) of the above Rules. The present investigation is only up to 31.12.2018 and any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 to 8 or any other buyer they shall be at liberty to approach the State Screening Committee Haryana for initiating fresh proceedings under Section 171 of the above Act against the Respondent. The concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible house buyers in future, The profiteered amount along with applicable interest shall be paid by the Respondent within a period of 3 months from the date of this order, failing which the same shall be recovered by the conc....