TaxTMI 
TaxTMI 
2020 (6) TMI 622
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....espondent in respect of the purchase of a flat by the Applicant No. 1 in the project "Elegant Berkeley" situated at Hennur Village, Kasaba Hobli, BBMP Ward No. 30, Bangalore North. In the said application the Applicant No. 1 alleged that the Respondent had not provided any tax invoice for the supply of construction service, charged higher GST @ 18% instead of 12% w.e.f. 01.07.2017 and also Service Tax was charged after GST came into force. Further, the Applicant alleged that the Respondent had raised the cost of the flat from Rs. 99,00,000 (Agreement Value) to Rs. 1,05,48,000/- after implementation of GST by extracting Service Tax on the already paid amount in the pre-GST era and also charged GST @ 18% (instead of 12%) on the balance amount after the introduction of GST. The said application was examined by the Applicant No. 2 and the Investigation Report dated 04.10.2018 under Rule 129(6) of the Rules, 2017 was submitted to the Authority. 2. The DGAP vide the said Report dated 04.10.2018 concluded that the allegation in the application dated 28.05.2018 related to excess charging of Service Tax and GST by the Respondent which could not be redressed through the provisions of Sect....
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.... DGAP visited the premises of the Respondent on 27.05.2019 along with an Inspector of the jurisdictional CGST Commissionerate (Bengaluru East). The Respondent was also intimated about the date of the visit by a letter dated 21.05.2019 which was duly acknowledged by him. During the visit, all the requisite documents/information were collected from the Respondent and also statement of Sh. B. Rajashekar, partner, Respondent had been recorded on 27.05.2019. However, copies of purchase bills were not readily available with the Respondent which were assured to be sent over email within three working days. 6. The Respondent submitted his replies to the DGAP vide letters/e-mails/statement dated 11.12.2018, 19.12.2018, 27.12.2018, 05.03.2019, 02.04.2019, 23.04.2019, 23.05.2019, 24.05.2019, 25.05.2019, 27.05.2019, 28.05.2019, 29.05.2019, 30.05.2019, 31.05.2019, 03.06.2019, 04.06.2019, 07.06.2019, 08.06.2019, and 10.06.2019. The replies of the Respondent are summed up as follows:- (a) That he was a partnership firm, having two partners namely i) B. Rajashekhar and ii) Smt. Vijaya Chamundi, having single GST registration. He was engaged in Civil Works and....
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....develop the project and the plan got approved on 04-02-2013 and he had started construction of the project in January 2013 (excavation). He entered into the Joint Development Agreement on 29-04-2015. As per MOU and JDA entered with the landowner, he was required to construct a total of 36 Residential Flats, one Club, and one Recreational Centre. He owned right to sell 20 out of total 36 Residential flats and he had already sold all the 20 flats of has share. Further, he stated that he had neither received nor applied for Occupation Certificate or Completion Certificate as it was not mandatory to get such a Certificate for a small project. It was mandatory for high rise buildings only. He also furnished the Account statement of all the 20 Residential flats buyers in the project "Elegant Barkley". As per the agreement entered with the buyers, he had received the consideration from the prospective buyers of flats and gave the receipts. He also submitted that he did not raise any tax invoice towards the money received. (h) That he had furnished the summary ledger of Input VAT and GST for the period from 01.04.2016 till 31.10.2018 for the project Elegant Barkley. As the Project....
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....t had not raised any tax invoice and shown amount received from the Applicant as Loan, the details of amounts and taxes paid by the Applicant No. 1 to the Respondent are furnished in Table- 'A' below. Table-'A' (Amount in Rs.) S.No. Payment Date Voucher No. Cheque No. BSP 1 21.07.2014 214, 215 & 216 NEFT 5,00,000 2 22.08.2014 311 NEFT 2,50,000 3 23.08.2014 313 NEFT 2,50,000 4 25.08.2014 314 & 315 NEFT 5,00,000 5 26.08.2014 319 NEFT 2,50,000 6 27.08.2014 322 NEFT 2,50,000 7 13.12.2014 543 065819 64,00,000 8 30.12.2017 236 003824 13,29,000 9 04.01.2018 233 832144 72,000 10 04.01.2018 (Towards Service Tax) 234 832145 3,78,000 11 04.01.2018 (Towards GST) 235 832146 2,70,000 12 TDS 1% of Basic 99,000 99,000 Total 1,05,48,000 9. The DGAP further observed that the Respondent have collected Rs. 99,00,000/- towards the basic cost of the flats and balance amount of Rs. 6,48,000 representing Service Tax and GST from the Applicant No. 1. The Respondent also informed that he....
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.... of Paragraph 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". Thus, the input tax credit pertaining to the residential units which are under construction but not sold is a provisional input tax credit which may be required to be reversed by the Respondent, if such units remain 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 attribu....
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....eley" the ratio of input tax credit to turnover, during the pre-GST (April 2016 to June 2017) and post-GST (July 2017 to October 2018) periods, are furnished in Table-'B' below. Table-'B' (Amount in Rs.) S.No. Particulars Pre-GST (April 2016 to June 2017) Post-GST (July 2017 to October 2018) Remark 1 CENVAT of Service Tax Paid on Input Services used (A) - - Rule 4 of the Cenvat Credit Rules, 2004 2 Input Tax Credit of VAT Paid on Purchase of Inputs (B) 6,86,241 - As per Ledger furnished by the Respondent 3 Input Tax Credit of GST Availed (C) - 6,08,920 As per books of accounts furnished by the Respondent 4 Total CENVAT/lnput Tax Credit Available (D) = (A+B) or (C) 6,86,241 6,08,920 5 Total Saleable Super Built-up Area (in SQF) (E) 61,232 61,232 As per JDA dated 29.04.2015 6 Super Built-up Area share of Land Owner (in SQF) (F) 27,414 27,414 As per JDA dated 29.04.2015 7 Input Tax Credit pertaining to the Land Owner (G) = (D*F/E) 3,07,235* 2,72,618* ITC pertaining to the Landowner' share.* 8 Input Tax Credit pertaining to the Respondent (H) = (D) ....
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....ax Credit to Total Turnover as per table - 'B' above (%) C 1.41 % 4. Increase in input tax credit availed post-GST (%) D= 1.41% less 0.49% 0.92% 5. Analysis of Increase in input tax credit: 6. Base Price raised/collected from July 2017 to October 2018 (Rs.) E 1,38,16,899 7. GST raised/collected over Base Price (Rs.) F=E*B 16,58,028 8. Total Demand raised/collected G=E+F 1,54,74,927 9. Recalibrated Base Price H = E*(1-D) or 99.08% of E 1,36,89,784 10. GST @ 12% I=H*B 16,42,774 11. Commensurate demand price J = H+I 1,53,32,558 12. Excess Collection of Demand or Profiteering Amount K=G-J 1,42,369 15. He further claimed that from Table-'C' above, it could be deduced that the additional input tax credit of 0.92% of the turnover should have resulted in the 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 such additional input tax credit was required to be passed on by the Respondent to the recipients. Further regarding the amount of additional benefit of the input....
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.... 1,21,256/- which includes both the profiteered amount @0.92% of the base price and GST on the said profiteered amount, from 10 other recipients who were not Applicants in the present proceedings. As these recipients were identifiable as per the documents provided by the Respondent, therefore, this additional amount of Rs. 1,21,256/was required to be returned to such eligible recipients. He also submitted that as the present investigation covered the period from 01.07.2017 to 31 .10.2018, profiteering, if any, for the period post-October, 2018, has not been examined as the exact quantum of input tax credit that will be available to the Respondent in the future could not be determined at this stage, when the Respondent is continuing to availe input tax credit in respect to the present project. 18.The above Report was considered by the Authority in its meeting held on 15.10.2019 and it was decided to hear the Applicants and the Respondent on 06.11.2019. Notice dated 17.10.2019 was also issued to the Respondent to explain why the Report furnished by the DGAP should not be accepted and his liability for having violated the provisions of Section 171 of the CGST Act, 2017 should not b....
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.... by the Respondent w.e.f. 01.07.2017? b. Whether there was any net additional benefit of ITC which has accrued to the Respondent which was required to be passed on by him to his recipients? c. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017, by not passing on the above benefits by the Respondent? 22. A perusal of the Report dated 08.10.2019 furnished by the DGAP shows that after taking into account the benefit of credit available during the pre-GST period from April 2016 to June 2017 to the taxable turnover received during the above period the ratio of ITC to turnover has been computed by the DGAP as 0.49% of the turnover as per Table-B supra. Similarly, the above ratio has been calculated as 1.41 % for the post-GST period from 01.07.2017 to 31.08.2018. Accordingly, the DGAP has claimed that the Respondent has benefited to the tune of 0.92% of the turnover which he is required to pass on to his buyers. The above ratios of ITC to turnover have been arrived at by the DGAP based on the information/documents supplied by the Respondent which has been duly verified by the DGAP and hence the above ratios can be relied on. The Res....
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....this Order to the Applicant No. 1 and the other eligible house buyers by the Respondent along with interest @ 18% from the date from which these amounts were realized by the Respondent from them, till they are paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which the above amounts shall be recovered by the concerned Commissioner CGST / SGST and paid to the eligible house buyers. 26. From the above discussions, it is clear that the Respondent has profiteered by an amount of Rs. 1,42,369/- during the period of investigation. Therefore, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 31.08.2018 therefore, 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 or other buyers they shall be at liberty to approach the State Screening Committee Karnataka for initiating fresh proceedings under Se....