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2020 (3) TMI 288
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....ock, 8th Floor in "Aparna Serene Park" project of the Respondent. 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 aforesaid reference was considered by the Standing Committee on Anti-profiteering, in its meetings held on 11th March, 2019, wherein it was decided to forward the same to the DGAP to conduct detailed investigation in to the complaint according to Rule 129 (1) of the CGST Rules, 2017. 2. The Applicant had furnished the following documents along with his application:- (a) Copy of booking application form along with receipts. (b) Copies of e-mails sent to the Respondent, requesting to pass on the benefit of appropriate input tax credit. 3. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP had issued Notice dated 04.04.2019 under Rule 129 (3) of the above Rules, asking the Respondent to intimate as to whether he admitted that the benefit of ITC had not been passed on to the above Applicant by way of commensurate reduction in the price of the flat and in case it ....
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....be required to reverse the proportionate input tax credit attributable to unsold units on the date of issue of Occupancy certificate by the competent authority. Further, where the entire consideration would be received after issuance of completion certificate, in terms of Section 17 of the Central Goods and Services Tax Act, 2017 read with Rule 42 of the Central Goods and Services Tax Rules, 2017, the Respondent would have to reverse the input tax credit proportionately. Therefore, input tax credit which formed part of the cost of construction of such unsold units would be reversed and the exact input tax credit attributable to units sold prior to receiving of completion certificate would be known only at the end of the project and after issue of occupancy certificate. Accordingly, the Respondent would pass on the net benefit of input tax credit to the customers. b) That the Respondent had also mentioned a term in booking application form which reads as "(za) The Company is agreeable to pass the net benefit of input tax credit for the projects under construction as per methodology & procedure to be determined by GST Standing Committee & Screening Committee under relevant S....
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....nt. (e) Tax rates - pre-GST and post-GST. (f) Copies of audited Balance sheets and cost audit reports for financial years 2016-17 & 2017-18. (g) Copy of Electronic Credit Ledger for the period from 01.07.2017 to 31.03.2019. (h) Reconciliation statement of ITC with VAT, ST-3, GSTR-3B for the financial years 2016-17, 2017-18 and 2018-19. (i) Sample copy of supplementary agreement of Serene Park with Land Owners along with details of flat allotment share details. (j) Details of turnover, output tax liability, GST payable and input tax credit availed for the project "Aparna Serene Park". (k) List of home buyers in the project "Aparna Serene Park". 7. The DGAP has also stated that all the documents placed on record were carefully examined by him and he had found that the main issues for investigation were whether there was reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and in case it was so, whether the Respondent had passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act,....
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....pect of the project, at the end of the project and pass on the benefit that has accrued on account of GST, may have merit but the profiteering, if any, was to be determined at a given point of time, in terms of Rule 129 (6) of the above Rules. Therefore, the additional input tax credit available to the Respondent and the amounts received by him from the Applicant and other recipients post implementation of GST, had to be taken into account to determine the benefit of input tax credit that was required to be passed on. 10. The DGAP has further stated that Para 5 of Schedule-III of the Central Goods and Services Tax Act, 2017, defining activities or transactions which shall be treated neither as a supply of goods nor a supply of services, reads as 'Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". Further. Clause (b) of para 5 of Schedule II of the Central Goods and Services Tax Act, 2017 reads as "(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certif....
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....s including the sub-contracts. From the information submitted by the Respondent for the period from April, 2016 to March, 2019, the details of the input tax credit availed by him, his turnover from the impugned project "Aparna Serene Park", the ratio of input tax credit to turnover, during the pre-GST period from April, 2016 to June, 2017 and post-GST period from July, 2017 to March, 2019 was furnished by the DGAP as per the Table-B given below:- Table-'B' (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total (Pre-GST) July, 2017 to March, 2018 April, 2018 to March, 2019 Total (Post-GST) (1) (2) (3) (4) (5)=(3)+(4) (6) (7) (8)=(6)+(7) 1. CENVAT of Service Tax Paid on Input Services used (A) 1,48,84,446 41,50,093 1,90,34,539 - - - 2. Input Tax Credit of VAT Paid on Purchase of Inputs (B) - - - - - - 3. Input Tax Credit of GST Availed (C) - - - - - - 4. Total CENVAT/Input Tax Credit Available (D)= (A+B) or (C) 1,48,84,446 41,50,093 1,90,34,539 7,11,97,013 37,37,73,621 44,49,70,634 5. Turnover....
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.... 4. Increase in input tax credit availed post-GST (%) D=4.42% less 0.38% 4.04% 5. Analysis of Increase in input tax credit: 6. Base Price raised/collected during July, 2017 to March, 2019 (Rs.) E 4,99,45,18,632 7. GST raised/collected over Base Price (Rs.) F=E*B 59,93,42,236 8. Total Demand raised/collected G=E+F 5,59,38,60,867 9. Recalibrated Base Price H=E*(1-D) or 95.96% of E 4,79,27,40,079 10. GST @12% I=H*B 57,51,28,809 11. Commensurate demand price J=H+I 5,36,78,68,888 12. Excess Collection of Demand or Profiteering Amount K=G-J 22,59,91,979 16. The DGAP has also observed from Table-'C' that the additional ITC of 4.04% of the turnover should have 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 ITC was required to be passed on to the respective recipients. 17. On the basis of the aforesaid CENVAT/ITC availability pre and post-GST and the details of the amount collected by the Respondent from the Applicant and t....
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....th the profiteered amount @ 4.04% of the turnover (base price) and 12% GST on the said profiteered amount. Further, the investigation has revealed that the Respondent has also realized an additional amount of Rs. 22,55,17,114/- (Rs. 22,59,91,979/-(-) Rs. 4,74,8650- which included both the profiteered amount @ 4.04% of the turnover (base price) and GST on the said profiteered amount, from other recipients as well who were not Applicants in the present proceedings. These recipients were identifiable as per the documents provided by the Respondent giving the names and addresses along with Unit No. allotted to such recipients. Therefore, this additional amount of Rs. 22,55,17,1141- was required to be returned to such eligible recipients. 20. The DGAP has also stated that the present investigation has covered the period from 01.07.2017 to 31.03.2019. Profiteering, if any, for the period post March, 2019, 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 the stage, when the construction of the project was yet to be completed. He has further stated that the provisions of Section 171 (1) of the Centra....
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....omers by way of price reduction but without clear guidelines or explicit rules it was not possible to decide the quantum of the net ITC benefit to be passed on to the customers. The sale prices of the flats were dynamic and were based on various factors like saleable area, floor rise, facing, location of the project and the payment terms etc. In the absence of specific instructions, it was difficult to determine the benchmark pre-GST price for passing on the benefit by reduction in the prices. 25. The Respondent has also submitted that sale of properties after obtaining Occupancy Certificate (OC) was considered outside the ambit of GST therefore he was required to reverse proportionate credit of GST on expenses incurred during a financial year which were attributable to such revenue. Common expenses on administration, finance and marketing, etc. were required to be apportioned among the projects and ITC reversal was applicable on such expenses on sale of properties post obtaining of OC. 26. The Respondent has further submitted that the GST law provided for disallowance of ITC credit due to non-payment (of value and tax) to the vendors within 180 days which might result in dis....
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....d from July, 2017 to 31.03.2019. 30. It was also contended by the Respondent that with effect from 01.4.2019, he was collecting GST at 5% from the Buyers for the project in question i.e. "Aparna Serene Park" as against the applicable rate opted by him of 12%. He has been discharging GST at 12% with effect from 01.4.2019 and hence, was passing benefit of 7% to the customers effectively. Since the present investigation was confined only to the period from 01.07.2017 to 31.03.2019 and he has started passing of ITC benefit of 7% subsequent to 31.03.2019 it has resulted in additional cash flow of 2.96% when compared to the determined profiteering of 4.04% in the DGAP's Report. It is further contended by the Respondent that if the net benefit of ITC was computed by applying the same methodology which was adopted by the DGAP for the post GST period from (i) 01.07.2017 to 31.06.2019 and from (ii) 01.07.2017 to 31.09.2019, it would come to Rs. 15,38,55,476 and Rs. 9,30,63,742 respectively. From the above computations for the periods ending on 30.6.2019 and 30.9.2019, it was evident that the benefit of ITC to all the customers would not be equal if the computation of the net benefit on ac....
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....f ITC on the retention in account of performance clause made by the developers for the payments to be made to the sub-contractors did not have any bearing on determination and quantification of profiteered amount in terms of Section 171 of the Central Goods and Services Tax Act, 2017. c. The DGAP has also stated that the Respondent has submitted that w.e.f. 01.04.2019 he has been passing on benefit of input Tax Credit of 7% subsequent to continuation of option of discharging output GST by 12% but collecting only 5% GST from his customers. To support this contention, the Respondent had submitted copy of form dated 04.05.2019 exercising the option of collection of GST @12% and discharging GST @ 12% by availing ITC w.e.f. 01.04.2019. Further, he has submitted sample copies of receipts showing collection of GST @5% from the customers post 01.04.2019. He has also submitted copies of GSTR-1 & 3B along with list of home buyers for the period from 01.04.2019 to 30.09.2019. Further, vide letter dated 28.11.2019, the Respondent has expressed his agreement with the methodology used for determination and computation of profiteered amount by the DGAP in his Report dated 30.08.2019. Acc....
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....leged that the Respondent has been keeping the buyer's hard earned money in his pocket since the implementation of GST. The Applicant has further alleged that till date the buyers have not received any benefit of ITC and therefore, the Respondent's request for extension of period of investigation should not be considered as it would give him chance to delay the passing on of the ITC benefit to his buyers. The Applicant has also requested to add interest in the ITC benefit amount. 33. A copy of the Report of the DGAP, dated 02.01.2020, on the submissions of the Respondent was sent to the Respondent vide Order dated 08.01.2020 for filing re-joinder, if any. The Respondent vide his submissions dated 13.01.2020 has stated that he was totally in agreement with the Report of the DGAP dated 02.01.2020 and he did not want to file any re-joinder. The Respondent has further requested to conclude the hearings accordingly. 34. We have carefully considered all the submissions filed by the Applicants, the Respondent and the other material placed on record and find that the Applicant No. 1, vide his complaint dated 26.02.2018 has alleged that the Respondent was not passing on the bene....
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....by the Respondent in respect of the turnover and the area sold by him and hence, he cannot find fault with the above Table. It is also clear from the above Tables that the additional benefit of ITC can only be calculated by comparing the credit of CENVAT availed by the Respondent during the pre-GST period with the ITC availed by him during the post-GST period to calculate the benefit which should be passed on to the buyers as per the provisions of Section 171 (1) of the above Act. The mathematical methodology applied by the DGAP while computing the above ratios and benefit as per the above Tables is correct and the same can be relied upon. 36. The Respondent has also claimed that the methodology for computation of profiteered amount has not been defined in the Act/Section. In this connection, it is stated that the main contours of the 'Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and the benefit of ITC are enshrined in Section 171 (1) of the CGST Act, 2017 itself which states that "Any 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 ....
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....ommercial unit, mode of payment of price, stage of completion of the project, timing of purchase of inputs, rates of taxes, amount of ITC availed, total saleable area, area sold and the taxable turnover realised before and after the GST implementation would always be different than the other project and hence the amount of benefit of additional ITC to be passed on in respect of one project would not be similar to another project. Issuance of Occupancy Certificate/ Completion Certificate would also affect the amount of benefit of ITC as no such benefit would be available once the above certificates are issued. Therefore, no set parameters can be fixed for determining methodology to compute the benefit of additional ITC which would be required to be passed on to the buyers of such units. Further, the facts of the cases relating to the Fast Moving Consumer Goods (FMCGs), restaurants, construction and cinema houses are completely different and therefore, the mathematical methodology employed in the case of one sector cannot be applied in the other sector otherwise it would result in denial of the benefit to the eligible recipients. Moreover, both the above benefits have been granted by....
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....e flats which have not been sold yet and the ITC in respect of these flats would be available with the Respondent in case it is required to be reversed at the time of issue of OC. Hence, the above argument of the Respondent is untenable. 39. The Respondent has further stated that he would be entitled to the ITC only if the four conditions mentioned in Section 16 of the CGST Act, 2017 are complied with one of which requires that his suppliers should have deposited the GST which they had charged from him on the supplies made to him and in case they have not deposited the GST his ITC would be disallowed. The above contention of the Respondent is hypothetical as the suppliers are required to deposit the GST charged by them regularly and in case they default they are liable for penalty and interest. The Respondent is also required to reconcile his supplies regularly with his suppliers. Therefore, the above contention of the Respondent is not correct. 40. The Respondent has also submitted that he had not refused to pass on the benefit of ITC however, it is clear from the submissions dated 28.11.2019 filed by the Applicant No. 1 that the Respondent has not passed any benefit of ITC ....
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....le granting benefit of ITC. Therefore, the above claims of the Respondent are far-fetched and cannot be accepted. 44. It was also contended by the Respondent that with effect from 01.4.2019, he was collecting GST @ 5% from the buyers and was paying GST @12% and was passing on benefit of 7% to the customers. The above claim of the Respondent has no effect on the computation of the profiteered amount till 31.03.2019 as he has not passed any benefit of ITC during the investigation period w.e.f. 01.07.2017 to 31.03.2019. The claim of the Respondent that he has started passing benefit of 7% and there was additional cash flow of 2.96% is completely hypothetical and unverified and hence the same cannot be relied upon. His further claim that the net benefit of ITC for the period from (i) 01.07.2017 to 31.06.2019 and from (ii) 01.07.2017 to 31.09.2019, would be Rs. 15,38,55,476/- and Rs. 9,30,63,742/- respectively is also without any basis as he has not explained the methodology of computation and the amount of benefit which is to be passed to each flat buyer. The above calculation of the benefit cannot be taken in to account on the mere assertion of the Respondent. He has also contended....
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....erit and which needed to be examined by him. In this connection it would be appropriate to mention that the DGAP has computed the benefit of ITC w.e.f. 01.07.2017 to 31.03.2019 during which the Notification dated 29.03.2019 was not applicable and therefore, the impact of this Notification would be only on the benefit which the Respondent is required to pass on after coming in to force of the above Notification. The genuineness of the claim of the Respondent that he has not collected 7% GST from the buyers is also required to be verified. Therefore, the benefit of ITC which has been computed by the DGAP vide his Report dated 30.08.2019 w.e.f. 01.07.2017 to 31.03.2019 has to be passed on to the eligible house buyers without further delay. Any excess benefit passed on the basis of the above Report can be adjusted by the Respondent in the subsequent entitlement of the buyers as the project is still under execution. Hence, there are no grounds to remand this case to the DGAP under Rule 133 (4) of the CGST Rules, 2017 at this stage as has been suggested by him. 47. It is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the ex....