TaxTMI 
TaxTMI 
2020 (3) TMI 185
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....Pradhan Mantri Aawas Yojna (PMAY) in the Respondent's project "Mayur Residency Extension". He had also alleged that the Respondent had charged GST @ 18% on the construction service/ works contract service and had not passed on the benefit of input Tax Credit (ITC) to him by way of commensurate reduction in the price of the house after implementation of the GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017. The said application was examined by the Standing Committee on Anti-profiteering in its meeting held on 11.03.2019 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 (1) of the CGST Act, 2017, it had forwarded the same with its recommendation to the DGAP for a detailed investigation. The aforesaid recommendation was received by the DGAP on 27.03.2019 (Annexure-2). 2. The DGAP in his Report dated 30.08.2019 has stated that the Applicant No. 1 had submitted copies of the written communication held by him with the Respondent and copies of the demand letters alongwith his application. 3. Thereafter, the DGAP on receipt of the reference from the Standing Committee on Anti Profiteering, had issued a notice to t....
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.... of the basic price of construction service and he was calculating the final impact of proportionate ITC. 6. The DGAP in his Report has further stated that vide the aforesaid letters/e-mails, the Respondent had submitted the following documents/information:- a. Copies of GSTR-1 and GSTR-3B Returns for the period from July, 2017 to March, 2019. b. Service Tax and VAT Returns for the period from April, 2016 to June, 2017. c. Copies of TRAN-1 Returns for the transitional credit availed by the Respondent. d. Copies of VAT & ST-3 Returns for the period from April, 2016 to June, 2017. e. Electronic Credit Ledger for the period from July, 2017 to March, 2019. f. Tax rates, pre-GST and post-GST. g. Copies of Balance Sheets for the FY 2016-17 & 2017-18. h. Payment plan of the Applicant No. 1 alongwith agreement and demand letters. i. Details of turnover and ITC in respect of the project "Mayur Residency Extension". j. List of home buyers in the project "Mayur Residency Extension". 7. The DGAP has further stated that the Respondent had requested to treat all the data submitted by him as confidenti....
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..../VAT Credit Available (C)= (A+B) - - 4. Input Tax Credit of GST (D) - 30,49,658 5. Total Turnover as per Home buyers list (E) 26214799.00 2,54,69,428 6. Total Saleable Area of Flats in the project (in Sq.mt.) (F) 6077.50 6077.50 7. Area Sold relevant to Turnover as per Home buyers list (G) 2673.7 6077.50 8. Relevant CENVAT/Input Tax Credit (H)=[(C) or D*(G)/(F)] - 30,49,658 9. Ratio of CENVAT/ Input Tax Credit to Turnover [(I)=(H)/(E)]*100 0.00% 11.97% 12. The DGAP has also claimed that as per Table-A, 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 Nil and during the post-GST period (July, 2017 to March, 2019), it was 11.97%. Therefore, he has submitted that it was clear that post-GST, the Respondent had apparently benefited from additional ITC to the tune of 11.97% of his turnover. Accordingly, the DGAP has computed the profiteered amount by comparing the ratio of ITC available to the turnover during the pre-GST period from April, 2016 to June, 2017 with that of the post-GST period from July, 2017 to March, 2019, w....
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.... additional ITC and charging GST @ 18% on the pre-GST basic prices and hence the Respondent has contravened the provisions of Section 171 of the of the CGST Act, 2017. 14. The DGAP has also reported that as regards the quantification of profiteering or the amount of benefit not passed on by the Respondent to the recipients, taking into account the aforesaid CENVAT/ITC availability pre-GST and post-GST and the details of the amount collected from the home buyers during the period from 01.07.2017 to 31.03.2019, the amount of benefit of ITC not passed on to the recipients or in other words, the profiteered amount came to Rs. 35,98,596/- which included 18% GST on the base profiteered amount of Rs. 30,49,658/-. The home buyer and unit no. wise break-up of this amount has been given in Annexure-12 by the DGAP in his Report. The DGAP has also stated that as per S. No. 12 of Annexure-12, the benefit to be passed on to the Applicant No. 1 worked out to be Rs. 19,953/- which included both the profiteered amount @11.97% of the basic price and 18% GST on the said profiteered amount. The DGAP has further reported that the Respondent has also claimed that he has passed on 4% benefit to the ho....
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.... Credit availed and Turnover with the statutory Returns (GST, ST, VAT Returns) for the period from 01.04.2016 to 31.12.2018. b. Project-wise list of all payments received from each of their buyers and ITC benefit passed on, if any, to them. c. Balance Sheets for the years 2016-17, 2017-18 & 2018-19 along with the project wise Trial Balance for the same period. d. Project-wise Ledger for the period from 01.04.2016 to 31.12.2018. e. Details of the total number of apartments/flats/commercial units/residential units in the project with total area of each flat. f. TRAN-1 & TRAN-2 Returns. g. Details of CENVAT/ITC Reversal, if any. h. Details of purchase of land alongwith agreements with Group Companies/partners of the subject projects. i. Copy of RERA Registration. 18. The Respondent vide his submissions dated 09.10.2019 has stated:- a. That he has not contravened any Rules or Section of the CGST Act and has reduced his rates in the post-GST regime. On completion of the project, he was transferring the final benefit of ITC to the customers in the form of refund of money. He has also enclosed copies of th....
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....ng July, 2017 to March, 2019 E 2,54,69,428 5 GST @18% on Basic price/consideration F=E*18% 45,84,497 6 Total Demand collected/raised G=E+F 3,00,53,925 7 Recalibrated Basic Price/consideration 88.03% of @19623.52/sq.mt. i.e. proposed increased in year 2017 26157082.72 8 GST @18% on recalibrated Basic Price/consideration I=H*18% 4708275 9 Commensurate Demand J=H+I 30865358 10 Excess Realization or Profiteered Amount K=G-J -811433 e. That it was quite evident that 4% of basic price/consideration was immediately reduced to pass on 4% ITC benefit to the customers and the rest approximately 4% was paid at the time of completion of the project. f. That he was attaching calculation sheet duly acknowledged by the customers as evidence in support of reduction in the price/consideration from Rs. 17,521/- to Rs. 16,8201- and final payment of amount of the ITC benefit. The details of the calculations furnished by him are as per the Table-D below:- Table - D (Amount in Rs.) S.No. P....
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.... 25469348.60 Immediate passed on 4% GST input by reduction of rates by 4% of basic rate after post GST regime 16820.00 1061475.23 Benefit already passed on 1061475.23 B: input GST benefit by way of refund of input on post GST payment. Particulars Construction cost paid GST paid on basic rate @ paid 18% Total amount (cost+GST) Payment made in post GST regime i.e. on or after 01/07/2017 (excluding security amount) 25469348.60 4584482.75 30053831.35 Input GST benefit by refund of input on post GST payment made Particulars Construction cost paid Input credit benefit@ 4% of construction of cost Input credit benefit@ 4% of construction cost 4.00% Input GST credit to be refunded to you is 4% of construction cost on amount paid 25469348.60 1018773.94 1018773.94 Total GST input benefit passed on Particulars Reference row Amount (in Rs.) By way of reduction in price/consideration. Already passed on :1=a 1 1061475.23 B....
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..... on or after 01/07/2017 (excluding security amount) 141216.00 25418.88 166634.88 Input GST benefit by refund of input on post GST payment made Particulars Construction cost paid Input credit benefit@ 4% of construction of cost Input credit benefit@ 4% of construction cost 4.00% Input GST credit to be refunded to you is 4% of construction cost on amount paid 141216.00 5648.64 5648.64 Total GST input benefit passed on Particulars Reference row Amount (in Rs.) By way of reduction in price/consideration. Already passed on :1=A 1 5885.40 By way of refund. To be refunded :2=B 2 5648.64 Total input GST credit passed on: 3=(A+B)=(1+2) 3 11534.04 Our cost before GST: 4 (refer A) 4 147101.40 GST Due Before Any Input Benefit: 5= (4*18%) 5 25418.88 Amount passed on by way of input:6=(A+B)=(1+2) 6 11534.04 Final net GST burden:7=(5-6) 7 13884.84 % of fi....
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....his claim of rate reduction in the post-GST regime was on account of additional benefit of ITC. It might be due to any reason like reduction in the cost of construction or any marketing condition etc. 20. That in the Report dated 30.08.2019, the increase in the ITC availed by the Respondent as a percentage of the total turnover in the post GST period has been quantified. To arrive at profiteering, he has computed the increase in availability of ITC for the period from 01.07.2017 to 31.03.2019, compared to the ITC available in the pre-GST period from 01.04.2016 to 30.06.2017. 21. The Respondent vide his submissions dated 25.10.2019 has also submitted:- i. That in pursuance of Section 171 of the CGST Act, 2017, he has taken the following steps:- a) He has reduced his rates in the post GST regime thereby attempting to not increase his profit due to GST input. He has also furnished the details of a few cases to depict the above stated action:- Customer Name Annex- A Page No. Scheme Name H.No. Date of Agreement/allotment Area Rates Cost Krishna Kumar 1 Mayur Residency 28L 05.09.2016 145.39 17521 2547378.19 Kancha....
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....; Before GST demand 147101.40 Post GST demand 141216.00 Amount received/demand raised pre GST period 0.00 A: Input GST benefit by way of reduction in price/consideration Particulars Work/payment completed in % Pre GST rates Amount due Amount Due pre GST 147101.40 Service rendered in pre GST 0.00 0.00 Balance amount due Post GST regime 100.00 141216.00 Net amount due after passing GST benefit To You 100.00 141216.00 Immediate passed on 4% GST input by reduction of rates by 4% of basic rate after post GST regime 5885.40 Benefit Already passed on 5885.40 B: input GST benefit by way of refund of input on post GST payment. Particulars Construction cost paid GST paid on basic rate @ paid 18% Total Amount Paid (Cost+GST) Payment made in post GST regime i.e. on or after....
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....; 3 Increase in input tax credit availed post-GST (%) D=11.97% less 0.00% 11.97% Analysis of Increase in input tax credit: 4 Basic Price collected during July, 2017 to March, 2019 E 2,54,69,428.00 5 GST @18% on Basic price F=E*18% 45,84,497.04 6 Total Demand collected/raised G=E+F 3,00,53,925.04 7 Recalibrated Basic Price @17521/sq.mt. i.e. basic rates at the time of implementation of GST Act 23355157.03 8 GST @18% on recalibrated Basic Price/consideration I=H*18% 4203928.26 9 Commensurate Demand J=H+I 27559085.29 10 Excess Realization or Profiteered Amount K=G-J 2494839.75 11 Already passed on by reducing price @ 701/Sq.Ft 4.17 1061479.00 12 By way of repayment in cash / bank at the time of completion 4.00 1018773.00 13. Balance to be paid 1.63 414587.75 viii. The Respondent has also accepted that as per his calculations, the recalibrated basic price was Rs. 2,33,55,157/- at Rs. 17,521/- per ....
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....e reduction has been passed on at the rate of 4% and 8% as per the list given in Annexure-12 of the DGAP's Report. e. The Respondent has also stated that the total ITC benefit passed on to the customers by way of reduction in the prices was Rs. 10,00,3291- and by way of refund was Rs. 12,20,865/-, total amounting to Rs. 22,21,194/-. He has also stated that he has annexed the acknowledgments (Annexure-4) from the customers in support of his claim that he had passed on the ITC benefit by way of reductions and refunds. 23. The Respondent vide his e-mail dated 19.11.2019 has also filed written submissions stating:- a. That he was in agreement with the DGAP Report that he has to pass on the benefit of ITC to the recipients. b. That as per DGAP's Report, he was required to pass on 11.97% of gross receipts collected during the impugned period. He has annexed the chart depicting the quantum of 11.97% of gross receipts and also 4% amount passed by way of reduction in price and 4% by way of cheque. c. That the balance amount of profiteering payable by him to his customers was Rs. 6,35,065/-. d. That while calculating the profiteering, the DGAP ....
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....x 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." 26. It is clear from the plain reading of Section 171 (1) mentioned above that it pertains to the passing on the benefit of reduction in the rate of tax and that of benefit of ITC. On the issue of reduction in the rate of tax, 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 determined is as to whether there was any additional benefit of ITC with the introduction of GST which has accrued to the Respondent which he was required to pass on to his buyers. It has also 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 from April-2016 to June-2017 was NIL and during the post-GST period from July-2017 to March-2019, it was 11.97%. This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 11.97% (11.97%-0%) of his turnover and the same was required to be passed on by him to the Applicant No. 1 and the other recip....
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....ent nor was required to be taken in to account while computing the profiteered amount as the same is to be calculated on the basis of the additional benefit of ITC which has accrued to the Respondent in the post GST period which is further required to be passed on to the buyers proportionate to the amount paid by each of them. Therefore, the above computation of the profiteered amount made by the Respondent is incorrect and hence, the same cannot be accepted. 29. The Respondent has further claimed vide Table-D supra that the profiteered amount was Rs. 24,94,839.75 out of which he had passed on Rs. 10,61,479/- by reducing the rate on the cost of construction by Rs. 701/- per sq. mt. and had passed on Rs. 10,18,773/- by way of cash reimbursement or through bank transfers and hence, he was required to pass on the balance amount of Rs. 4,14,587.75 only to his customers. However, as has been discussed above the Respondent has not produced any reliable and cogent evidence to prove that the reduction in the rate of construction was due to the passing on the benefit of ITC and hence the above claim of the Respondent that he has passed on an amount of Rs. 10,61,479/- on this ground canno....
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.... by the Respondent in this regard is not tenable and hence the same cannot be accepted. 32. The Respondent has also stated that he has passed on the ITC benefit of Rs. 8,47,441/- by way of reduction in the rate of construction and Rs. 8,10,884/- by way of refund vide account payee cheques to his 16 customers as per the Annexure-13 of Table-1. He has also submitted acknowledgements from the customers (Annexure-B) of having received the ITC benefit as supplementary evidence. However, as has been mentioned above the claim made by the Respondent that he has passed on the benefit of ITC by reducing the rate of construction has not been found to be correct and hence the above claim of the Respondent cannot be accepted. As far as the contention of the Respondent regarding passing on the benefit of ITC through cheques is concerned the Respondent has not produced any reliable evidence to support his claim. Moreover, the Respondent has also furnished different figures of benefit which he has claimed to have passed on though cheques. Therefore, his above claim on his mere assertion cannot be accepted. 33. The Respondent has also recalculated his liability with recalibrated price of Rs. ....
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.... of ITC. Therefore, the calculations and the methodology adopted by the Respondent cannot be accepted as reliable, accurate and correct. Accordingly, the claims of the Respondent that he has passed on benefit of ITC by way of reduction in prices and by way of refund, are fallacious and hence the same cannot be accepted. 35. The Respondent vide his submissions dated 25.10.2019 has also stated that as per his calculations, the amount of ITC benefit to be passed on to the Applicant No. 1 was Rs. 11,534/- instead of Rs. 19,953/- as has been computed vide Annexure-12 of the DGAP's Report. Vide his above submissions the Respondent has further claimed that as per his calculations, the benefit of ITC which has been passed on to the Applicant No. 1 was Rs. 1,25,821/-, out of which an amount of Rs. 64,233/- has been adjusted as reduction in the price and the balance amount of Rs. 61,649/- has been paid through banking channels. Keeping in view the above written submissions, it can be safely concluded that the both the above claims made by the Respondent are contradictory and are ambiguous. Hence, the mathematical calculations and methodology applied by the Respondent to arrive at the prof....
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....e jurisdictional Commissioner of CGST/SGST Uttar Pradesh to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is passed on to all the eligible customers/buyers. A report in compliance of this order shall be submitted to this Authority by the concerned Commissioner CGST (SGST within a period of 4 months from the date of receipt of this. 38. It is also evident from the above narration of facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project 'Mayur Residency Extension' in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus apparently committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section. Accordingly, a notice be issued to him directing him to explain as to why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. 39. The Respondent vide his submissions dated 25.10.2019 has also admitted that he was ex....