TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 288
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....t 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 was so, to suo moto compute the quantum of the same and mention....
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....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 Sections & Rules of GST Act, 2017". In this regard it was submitted by the Respond....
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.... 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, 2017 or not. 8. The DGAP has further stated that the Respondent, vide his letter dated 24.04.2019 had submitted the copies of the Sale agreement dated 28.08.2018, booking app....
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.... 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 certificate, where required, by the competent authority or after its first occupation, whichever is earlier". In the light of these provisions, the DGAP has contended that the ITC pertaining to the units which were under construction but not sold was provisional ITC that may be required to be reversed by the Respondent, if such units would remain unsold at the time of issue of CC, in terms of Section 17 (2) & Section 17 (3) o....
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....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 for Residential Flats as per Home Buyers List (E) 42,97,24,965 44,81,93,285 87,79,18,250 1,63,25,67,864 3,36,19,50,767 4,99,45,18,631 6. Total Saleable Build-up Area (including Land Owners' share) (in SQF) (F) 28,02,340 28,02,340 7. Total Sold Build-up Area relevant to turnover as per Home Buyers List (in SQF) (G) 4,89,960 13,91,175 8. Relevant ITC [(H)= (D)*(G)/(F)] 33,27,991 22,08,98,257 Ratio of Input Tax Credit Post-GST [(I)=(H)/(E)] 0.38% 4.42% 13. The DGAP has also submitted from t....
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....able-'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 the other home buyers during the period from 01.07.2017 to 31.03.2019 the amount of benefit of ITC not passed on or in other words, the profiteered amount has been quantified by the DGAP as Rs. 22,59,91,979/-(Rupees Twenty Two Crore Fifty Nine Lakh Ninty One Thousand Nine Hundred and Seventy Nine Only) which included GST (c) 12%, on the base profited amount of Rs. 20,17,78,553/-. The home buyer and Unit No. wise break-up of this amount has been given in Annexure-18 of the DGAP's Report. This amount was inclusive of Rs. 4,74,865/- (including GST (c) 12% on the base amount of Rs. 4,23,986/-) which was the profiteered amount in respect of the Applicant No. 1, mentioned at Serial No. 300 of Annesure-18 of the Re....
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....ch 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 Central Goods and Services Tax Act, 2017 requiring 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 reduction in prices" ,have been contravened by the Respondent in the present case. 21. The above Report was considered by this Authority in its meeting held on 11.09.2019 and it was decided that the Applicants and the Respondent be asked to appear before this Authority on 27.09.2019. The Respondent was issued notice on 16.09.2019 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. During t....
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.... 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 disallowance of ITC on the payments made to the sub-contractors. 27. The Respondent has also claimed that cancellation of bookings after 1-2 years was a common event in the real estate industry where the amount paid by the customers was required to be refunded by the developer after retention. Offering of rebates for timely payment and early move-in etc. was also prevalent in the industry. However, the time limits prescribed under the law for issuance of credit notes would lead to tax loss in many cases as the tax would have been paid but no adjustment was available. Thus, the issuance of credit notes on account of cancellation of contracts or as a result of rebates offered imposed a challenge for tax adjustments on the refund....
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....t 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 account of implementation of GST was confined to a particular period and the deprived customers may initiate appropriate legal action against the Respondent before different judicial forums by claiming equal benefit of ITC. In such situation, the Respondent was required to re-compute and arrive at benefit of ITC after issue of CC after considering all the above factors and pass the benefit of ITC to all the buyers in just and equitable manner. Therefore, any order based on the Report dated 30-8-2019, would put the Respondent to irreparable loss and hardship. In this regard, the Respondent has also submitted following documents:- (a) Copy of the Form dated 04.5.2019 exercising the option of collection of GST @12% and discharging GST@12% by....
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.... 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. Accordingly vide letter dated 10.12.2019, the Respondent has recomputed the profiteering percentile as 3.33% for the period from 01.07.2017 to 30.09.2019 resulting into total profiteering amount of Rs. 28,99,07,458/- as against Rs. 22,59,91,979/- computed by the DGAP in his investigation Report dated 30.08.2019 for the period from 01.07.2017 to 31.03.2019. The Respondent has also submitted customer wise list of profiteered amount of Rs. 28,99,07,458/- along with passing on of Rs. 12,44,96,038/- (by way of short collection of GST on receipts for the period from 01.04.2019 to 30.09.2019) and Rs. 16,54,11,420/- (by way of Bank Cheques dated 30.11.2019). Further, the Respondent has submitted computation of interest as Rs. 1,57,75,602/- on the above amount passed on to the customers. In th....
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....P 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 benefit of ITC to him in spite of the fact that he was availing ITC on the purchase of the inputs at the higher rates of GST which has resulted in benefit of additional ITC to him and was also charging GST from him @12%. This complaint was examined by the Standing Committee in its meetings held on 11.03.2019 and was forwarded to the DGAP for investigation who vide his Report dated 30.08.2019, received by this Authority on 06.09.2019 has found that the ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was 0.38% and during the post-GST period this ratio was 4.42% as per the Table-B mentioned above and therefore, the Respondent has benefited from the additional ITC benefit to the tune of 4.04% (4.42% - 0.38%) of the total turnover which he....
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....ion, 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 reduction in prices." It is clear from the perusal of the above provision that it mentions "reduction in the rate of tax on any supply of goods or services" which means that the benefit of reduction in the rate of tax is to be passed on each supply of goods or flat and not at the level of an entity/group/company or on the entire supplies. Therefore, the benefit of tax reduction has to be passed on at the level of each supply of Stock Keeping Unit (SKU) to each buyer of such SKU or flat and in case it is not passed on the profiteered amount has to be calculated on each such SKU/flat. Further, the above Section mentions any supply" i.e. each taxable supply made to each recipient thereby clearly indicating that netting off of the benefit of tax reduction or ITC by a supplier is not allowed. A s....
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....er, 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 the Central as well as the State Governments by sacrificing their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and hence they have to pass on the above benefits as per the provisions of Section 171 (1). Therefore, the above contention of the Respondent is frivolous and hence the same cannot be accepted. 37. The Respondent has further claimed that the profiteering should have been computed at the time of completion of the project as the exact amount of ITC benefit cannot be computed before completion. In this connection it would be appropriate to mention that the benefit of ITC is required to be passed on as soon as the Respondent uses the ITC to discharge his GST output liability which he is doing every month a....
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.... 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 to his buyers till date and hence the claim of the Respondent that he has not refused to pass on the benefit of ITC is not bonafide and hence it cannot be accepted. 41. It is further submitted by the Respondent that though Anti-profiteering provisions mandated passing on of the tax benefits 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. In this connection it would be pertinent to mention that the Respondent had all the details of the CENVAT Credit and the ITC available to him on payment of VAT with him as well as the ITC which was available to him post implementation of GST and hence, there should have been no problem in computing the benefit of additional ITC which had accrued to him post GST and pass the s....
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.... 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 that the benefit of ITC to all the customers would not be equal if the computation of the net benefit on account of implementation of GST was confined to a particular period. The above contention of the Respondent is frivolous as the benefit is required to be passed on the basis of the amount of price collected from each buyers post GST which can never be same in the case of all the buyers as it would depend upon multiple variables mentioned supra. Moreover, the benefit is also required to be passed periodically and the buyers cannot be forced to wait till the completion of the project. Therefore, there is no question of the buyers claiming equal amount of ITC benefit and his suffering irreparable loss the Respondent is not paying even a single penny from his own account. 45. The Respondent vide his submi....
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....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 extent of 4.04% of the turnover during the period from 01.07.2017 to 31.03.2019 and hence the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has not passed on the above benefit to his customers by commensurate reduction in the prices of the flats. Accordingly, the profiteered amount is determined as Rs. 22,59,91,979/- inclusive of GST @ 12% on the base profiteered amount of Rs. 20,17,78,553/- in terms of Rule 133 (1) of the CGST Rules, 2017. Further, the Respondent has realized an additional amount of Rs. 4,74,865/- which includes both the profiteered amount @ 4.04% of the taxable amount (base price) and 12% GST on the said profiteered amount from the Applicant No. 1. He has further realized an additional amount of Rs. 22,55,17,114/- which includes both the profiteered....