TaxTMI 
TaxTMI 
2020 (7) TMI 309
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....utes of its meeting held on 25.04.201B- The above Applicant had alleged in his application that the Respondent had resorted to profiteering, while he had sold flat No. F-1149 in his project "16^th Park View", situated in Sector-19A Yamuna Express Way, Jaypee Green Sports City (East), Land Parcel, Mirzapur, Greater Noida to him. The above Applicant had also alleged that the Respondent had charged GST @ 12% from him on the consideration paid by him before the GST had come into force w.e.f. 01.07.2017. He had further alleged that he had paid the full amount for the purchased fiat on or before 30.06.2017 i.e. before the implementation of the GST and got the demand letter on 02.07.2017 in which no GST was charged on the consideration paid before 01.07.2017, but later on, in July 2017, the Respondent had raised demand for payment of GST @ 12% from him on the amount paid prior to the imposition of the GSL Along with the application, the Applicant had submitted the following documents:- (i) Duly filled in Form APAF-1. (ii) Clarification about applicability of GST on under construction and ready-to-move-in property issued by the CBEC (iii) Applicant's Ledger in th....
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....is by itself outside the framework of the said section 171. Therefore, the grievances of the Applicant could not be redressed through anti-profiteering provisions, However, this issue of charging of GST can be examined by the jurisdictional GST authorities." 4. The above Report was considered by this Authority in its sitting held on 30, 10.2018 and since the allegation of the above Applicant was not found to be maintainable by the DGAP it was decided to hear the Applicants on 29.11.2018. Sh. Shivam Agarwal the Applicant No. 1 was present in person along with his Counsel Sh. Prabhat Kaushik and the DGAP was represented by Smt, Gayatri, Deputy Commissioner. The Applicant No. I had stated during the hearing that the Respondent had not given the benefit of ITC to him which the Respondent had availed w.e.f. 01.07.2011 He had also submitted copy of the demand letter dated 17.07.2017 which showed that the Respondent had informed the above Applicant that his instalments were due on 21.07.2017 i.e. after coming in to force of the GST due to which it prima facie appeared that the above Applicant was entitled to the benefit of ITC. He had also submitted a copy of the letter dated 23.04.201....
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.... only the Service Tax and not the GST- The above Applicant had further submitted that since the GST @12% was collected on the last instalment the benefit of ITC should have been passed on to him. He had also contended that only 8% GST was collected from him by the Respondent by adjusting 4% tax as the net ITC benefit, however, he questioned the justification for passing on only 4% as no calculations were provided to him. 7. This Authority vide its order dated 17.01.2019 had asked the DGAP to file reply to the submissions made by the Respondent however, no specific reply on each issue raised by the Applicant was filed by the DGAP on the ground that all the issues/documents enclosed therein had been covered in his Report dated 23.10.2018. The DGAP was also asked to file his reply vide order dated 22.01.2019 on the submissions of the above Applicant dated 22.01.2019 and vide his Report dated 30.01.2019 the DGAP had stated that as per the Point of Taxation Rules, 2011, applicable to the Service Tax "where the invoice was raised or payment was received prior to the appointed date under GST (01.0712017), the point of taxation would arise before the appointed day and thus, such transac....
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....inclusive of GST @12% instead of earlier price of Rs. 28,52,850/- (inclusive of GST 12% instead of earlier price of Rs. 28,52,850/- (inclusive of ST @4.5%) but is not passing the benefit of input tax credit taken by him. (ii) The report received from Office of the Additional commissioner, HQ Lucknow in this regard along with the documentary evidences viz GSTR- 3B and Tran-1 form filled by the builder was perused and it was found that the builder had taken ITC in all the GSTR-3B (From July' 2017 to January' 2018) returns (copy enclosed) and utilized it for payment of GST. Therefore the contention of the complainant that benefit of ITC was not passed on to him prima-facie appears to be correct. (iii) It has also been noticed that the builder has made payments for his tax liabilities pertaining to reverse charge by cash as per the current legal provisions and has utilized it for payment of his liabilities of CST on his outward supplies. No other payment of taxes has been made through the cash edger." 10. It was absolutely clear from the perusal of para (ii) above that the recommendation Of the Uttar Pradesh Screening Committee made to the Standing Committee for in....
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.... of the project "GYC Galleria". The Respondent had also acknowledged that in total he had passed on an amount of Rs. 22,89.20,185/- as benefit of ITC to the buyers of the flats. The Respondent had also submitted that he had 33 (Thirty Three) more projects in the brand name of "Gaur" Where he has already passed on the commensurate ITC benefit to the flat buyers. List of all these projects along with percentage of ITC benefit claimed to have been passed on by the Respondent was submitted as is given below:- S.No. Project Name Total No. of Units as on 31/12/2018 GST Benefit to per GST Customers GST Benefit to per GST Customer After 25.01.2018 (Due to rate change) 1. Gaur Siddartham 2476 7.50% 3.50% 2. Gaur City-I (1st Avenue] 1668 NIL NIL 3. Gaur City-1(4th Avenue] 680 NIL NIL 4. Gaur City-1 (5th Avenue] 1320 NIL NIL 5. Gaur City-1 (6th Avenue) 1118 NIL NIL 6. Gaur City-1 (7th Avenue) 2888 60% Carpet Area upto 60 Sq. Mtr-3.5% other-6% 7. Gaur City-1 (7th Avenue High street) 92 4% 4% 8. Gaur City-2 (City Arcade) 119 4% 4% 9. Gaur City-2 (Ci....
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....hich the Respondent was required to pass on in respect of the above project. (e) to compute the benefit of ITC in respect of the "2nd Park View" and GYC Galleria' projects and the entitlement of each buyer. (f) to conduct investigation in respect of all the ongoing projects being executed by the Respondent after coming into force of the GST in which benefit of ITC was required to be passed on by the Respondent to the recipients. 13. The DGAP has accordingly, re-investigated the case and submitted his Report dated 10.12.2019 to this Authority on 11.12.2019, 14. The DGAP has stated that this Authority vide order No. 03/2019 dated 28.03.2019 has referred the matter back to him under Rule 133 (4) of the Rules, to conduct thorough investigation on all the relevant aspects of the present complaint and to compute ITC benefit to be passed on by the Respondent to the Applicant No, 1 as well as other buyers in respect of project "16 Park View". Further this Authority has also directed to compute the benefit of ITC in respect of the i'2f'd Park View' and "GYC Galleria" projects and also to conduct investigation in respect of all the ongoing projects of the Respondent a....
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....) at the time of the booking of the unit. The same had also been communicated to the customer at the time of booking and accounted in the booking form by name of GST discount. (c) That he had not applied any calculation for the allocation of the above benefit However, the benefit passed or committed to be passed on was in compliance of the guidelines issued by the CREDAI (Confederation of Real Estate Developers Association of India)- Further these benefits have been passed irrespective of the increase in cost by whatsoever reason and any consideration to the incremental ITC. Even going by the various calculations made during the course of the proceedings before this Authority, the benefit of ITC actually passed on by the Respondent was more than the earned ITC benefit due to introduction of the GST. (d) That the provisions of the Section 171 of the CGST Act, 2017 have ignored certain aspects which might arise till the completion of the project, There were various instances when the Respondent could lose the ITC in future due to various reasons or events, Therefore, any such contingencies and situations which led to the reduction/reversal/loss of credit in GST woul....
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....builders. However, after introduction of the GST, all taxes on the goods & services have been subsumed in the GST and inputs have to be purchased by paying GST, Further credit has been allowed by the GST law on the taxes charged on the purchases of goods & services. The credit for goods which was not allowed in the Pre GST regime has become eligible in the GST regime. (v) That the projected material cost as on date has been analysed by the Respondent for the remaining construction which would be Rs. 70,00 Crore approximately on which tax credit has been projected as Rs. 9.81 Crore (approximately). The same has been considered for the analysis of the benefit arising due to the GST even the same was contingent and has not actually accrued till date. (vi) That during the course of the implementation of the GST, the demand has decreased and it was at all-time low. The same was due to various reasons including introduction of the GST as a key reason. To address this issue, various brokers have been appointed by the Respondent to revive his plunged sales, The appointment of the brokers has caused rise in the cost due to commission. (vii) That the project has be....
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.... an 30.06.2017 Total Remarks for references No. of Flats A 2,146 958 3,104 Units Super Area (in Sq.Ft.) B 25,95,085 12,84,875 38,79,960 TRANSITIONAL CREDIT Credit u/s 140 (3) C Not available as per section 140(3) 4,74,90,878 4,74,90,878 TRAN-1 D=C/B - 37 POST GST Incremental ITC BENEFIT Proportionate Area (for demand/sale made in GST) E 6,32,212 12,84,875 19,17,087 Details in "Customer wise credit benefit sheet" ITC availed on goods (July 2017 - Dec, 18) F 15,79,95,883 Summery GST return for post GST credit Budgeted ITC to be availed (post Dec-2018 till completion) G 9,81,19,715 Summery of projected cost Total ITC H=F+G 25,61,15,597 Benefit per sq. ft. under GST I=Total of (H)/Total of (E) 134 134 134 Total J-D+I 134 171 NET TOTAL BENEFIT Total benefit K=E*J 8,44,61,140 21,91,45,335 30,36,06,475 Benefit passed on till date (sold unit) On issued demand (L) ....
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....plicant like booking ledgers or demand/credit notes raised on him. 20. The DGAP has further stated that he has carefully examined the order received from this Authority, the various replies of the Respondent and the documents/evidence on record and found that the main issues for determination were whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent, on introduction of GST w.e.f. 01.07.2017 and if so, whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. 21. The DGAP has also submitted that the Respondent, vide his letter dated 20.05,2019f has submitted a copy of the allotment letter dated 19.06.2017, application form and demand letters for the sale of Flat No. F-1149 to the above Applicant, measuring 1,000 sq. ft., at total basic sale price of Rs. 27,55,500/- (Rs, 2,730/- basic sale price per sq. ft.) and Rs, 500/- for Adhoc Charges. and Rs, 25,000/- for IFMS. The details of the amounts and taxes paid by the above Applicant to the Respondent have been furnished by the DGAP as is given in Table-'D' below:- Table-'D' (Amount in Rs.) S.No....
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.... of ITC or reduction in the rate of tax to the consumers. Thus, the legal position was unambiguous and could be summed up as follows.- (a) That a supplier of goods or services must pass on the benefit of ITC or reduction in the rate of tax to the recipients by commensurate reduction in prices. (b) That the law did not offer a supplier of goods and services any flexibility to suo moto decide on any other modality to pass on the benefit of ITC or reduction in rate of tax to the recipients. Therefore, in terms of Section 171 of the CGST Act, 2017, the claim of increase in the cost on account of increase in commission, increase in interest cost (due to agitation by farmers) and the implementation and compliance cost of GST & RERA could not be considered, 23. The DGAP has also observed that the contention of the Respondent that he would, compute the benefit on account of ITC of GST in respect of the project, at the end of the project after making necessary adjustments on account of various contingencies and situation which lead to the reduction/reversal/loss of credit in GST in future. might have merit but the profiteering, if any, had to be determined at a given....
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.... additional ITC available to him post-GST. 25. The DGAP has also contended that the Respondent had claimed in his letter submitted to this Authority during the hearing held on 27.02.2019 that he had passed on the ITC benefit to his customers @ 4%-6% including benefit of 4% to the Applicant No, 1. The DGAP has also submitted that it was seen and verified from the Applicant's Ledger furnished as a part of the Respondent's letter dated 20.05.2019 that the Respondent has passed on the benefit of Rs. 87,326/- to the above Applicant vide credit note No. CN16/01254/17-18 dated 09.10.2017. However the correctness of the amount of benefit so passed on by the Respondent had to be determined in terms of Section 171 of the CGST Act, 2017 and the Rules made thereunder. Therefore, the ITC available to the Respondent and the taxable amount received by him from the above Applicant and other recipients, post implementation Of GST, had to be taken into account for determining the benefit of ITC required to be passed on. 26. The DGAP has also stated that as regards the allegation of profiteering, it was observed that prior to 01.07.2017 i.e. before the GST was introduced, the Respondent was eli....
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....pondent has benefited from additional ITC to the tune of 5.77% [7.32% (-) 1.55%] of the turnover, Accordingly, the profiteering has been examined by comparing the applicable tax rate and ITC available in the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.50% was payable with the post-GST period (July, 2017 to March, 2019) when the effective GST rate was 12% (GST @ 18% (along with 1/3^rd abatement for land value) on construction service, vide Notification No. 11/2017-CentraI Tax (Rate), dated 28.06.2017. Accordingly, on the basis the figures contained in Table-Et above, the comparative figures of the ratios of ITC availed/available to the turnover in the pre-GST and post-GST periods as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period, has been tabulated by the DGAP as has been given in Table-'F' below:- Table-'F' (Amount in Rs.) S.No. Particulars Post-GST 1. Period A July, 2017 to March, 2019 2. Output GST rate (%) B 12% 3. Ratio of CENVAT credit/ITC to Total Turnover as per table - 'B' above (%) C 7.32% 4. Increase in ITC availed ....
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....ST, the ITC as a percentage of turnover might be erroneous. Therefore, the benefit of ITC in respect of these 460 units might be calculated when the consideration would be received from such units by taking into account the proportionate ITC in respect of such units. 30. The DGAP has also stated that the Respondent has also submitted that he has passed on benefit of Rs. 28,22,65,749/- to the home buyers, He has also submitted sample copies of the credit notes vide his submission dated 08.11.2019 vide which he has passed on the benefit of ITC and the same has been verified by the DGAP an found to be correct. A summary of category-wise ITC benefit required to be passed on and the benefit actually passed on, has been furnished by the DGAP as is mentioned in Table-'G' below Table-'G' (Amount in Rs-) S.No. Category of Customers No. of Units Area (in Sq.Ft.) Amount Raised/Received Post GST Benefit to be passed on as per Annex-14 Benefit passed on by the Respondent (Excess)/Shortage of Benefit (Profiteering) Remark 1. Applicant 1 1,000 21,84,000 1,41,139 87,326 53,813 Further Benefit to be passed on as per Annex-15 2. Bu....
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....additional amount of Rs. 1,04,23,791/- as has been mentioned at Sr. No. 2 of Table- from 907 other recipients 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 Nos, allotted to such recipients. Therefore, this additional amount of Rs. 1,04,23,791/- was required to be returned to such eligible recipients. Further, the benefit of ITC in respect of 460 units as mentioned at Sr. No. 4 of Table- 'G' might be calculated when the consideration was received from such units by taking into account the proportionate ITC in respect of such units and would be adjusted in future demands. 33. 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 as the exact quantum of ITC that would be available to the Respondent in future could not be determined at the stage, when the Respondent has been availing ITC in respect to the present project. The DGAP has further stated that in view of the aforementioned findings, it appeared that provisi....
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....e Instant case. during the post GST regime, he has availed ITC amounting to Rs. 16,36,99,492/-pertaining to the input services which meant that ITC amounting to Rs. 2,72,83,248 (16.67% of 16,36,99,491) pertained to the incremental tax paid on procurement of input services which should be excluded from the total amount of profiteering calculated by the DGAP. 36. The Respondent has also claimed that profiteered amount should have been restricted to the ITC availed w.r.t, the goods only. He has further claimed that during the pre-GST regime. credit of taxes pad (Excise Duty and VAT) on goods was not available which has become available under the GST regime. Therefore, the benefit that actually arose due to GST implementation was that of ITC on taxes paid on goods. The Respondent has also stated that in the calculations of the DGAP, the benefit which has accrued to him from the additional ITC has been taken into consideration in respect of the goods as well as services. Out of total ITC of Rs. 29 57 Crore, an amount of Rs. 13.20 Crores was related to the goods. Therefore, the amount of profiteering calculated by the DGAP should have been restricted to the ITC availed by the Responde....
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....ould have been considered while calculating profiteering:- The DGAP has stated that Section 171 (1) provided that in the event of a benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction could obviously be in monetary terms only so that the final price payable by a consumer got reduced. This was the legally prescribed mechanism for passing on the benefit of ITC or reduction in the rate of tax to the consumers under the GST regime. Section 171 simply did not provide a supplier of goods or services any other means of passing on the benefit of ITC or reduction in rate of tax to the consumers. Therefore, in terms of Section 171 of the above Act, the claim of the Respondent that increase in cost on account of increase in commission, increase in interest cost (due to agitation by farmers) end the implementation & compliance cost of GST & RERA could not be considered. 38. 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 13.12.2017 had alleged that the Responde....
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....c prices of his flats by 5.77% due to additional benefit of ITC and by charging GST at the increased rate of 12% on the pre-GST basic prices, he has contravened the provisions of Section 171 of the CGST Act, 2017. The amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount comes to Rs. 19,72,09,203/- which includes 12% GST as per Annexure-14 of the Report dated 10.12,2019. This amount also includes the profiteered amount of Rs. 1,41,139/- including 12% GST in respect of the Applicant No. 1. 40. It is clear from the perusal of the above Report that the DGAP has computed the ratio of CENVAT to the turnover for the pre GST period and compared it with the ratio of ITC to the turnover for the post GST period and then computed the percentage of benefit of additional ITC which the Respondent is required to pass on to the flat buyers- The above ratios have been computed by the DGAP on the basis of the Service Tax and GST Returns filed by the Respondent during the both the above periods and the ITC Registers maintained for the above periods by him and hence, the ratios calculated by the DGAP are based on the factual record submitted by the Respon....
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....Tax was being computed @15% during the pre GST period which was increased to in the post GST period and hence this incremental tax of 3% paid on the services should not form part of the profiteered amount as it did not amount to additional benefit of ITC. In this regard it would be pertinent to mention that the Respondent cannot appropriate the additional ITC which he has earned after coming in to force of the ITC as it does not form part of his profit. The ITC available to him by paying GST on the purchase of the services is a concession which has been granted by the Central and the State Government out of their scarce tax revenue and he cannot enrich himself at the expense of the public exchequer. He is required to pass on the benefit of the incremental ITC as the same has not been built in by him in his initial cost of the fiat. He cannot put the buyers at double jeopardy by availing the benefit of additional ITC as well as by not reducing the prices of the flats. The Respondent is not required to pay even a single penny from his own pocket as benefit of ITC and hence he cannot deny the above benefit, Moreover, the benefit of ITC is also available to the suppliers of the Respond....
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....nd dividing it with the total saleable built up area and hence, the computation of profiteered amount has been made as per the claim of the Respondent, 45. The Respondent has further contended that he has incurred expenses on marketing of his project by paying commissions which has increased the cost of the project which should have been considered while calculating the profiteering. On this issue it is mentioned that marketing of the project has been done by the Respondent in the normal course of his business which is normally done in the real estate business and hence he cannot claim inclusion of marketing expenses in the cost of the flats, Therefore, the above contention of the Respondent cannot be accepted. 46. It is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the extent of 577% of the turnover during the period from July, 2017 to March, 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 benefit of ITC to his customers. Thus the profiteered amount is determined as Rs. 19,72,09,203/- inclusive of GST @ 12% as has been mentione....
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....nt w.e.f. 01.042019 till 30.06.2020 or till the date of issue of Completion Certificate whichever is earlier. 49. It is also evident from the above narration of the facts that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his above project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A} of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section. Accordingly, a Show Cause Notice be issued to him directing him to explain 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. 50. It is also observed that this Authority vide its Order dated 28.03.2019 passed under Rule 133 (4) of the CGST Rules, 2017 had directed the DGAP to cause further investigation to compute the benefit of ITC in respect of the Park View" and "GYC Galleria" projects being executed by the Respondent and the entitlement of each buyer, The DGAP was further directed to conduct ....
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....it to per GST Customers GST Benefit to per GST Customer After 25.01.2018 (Due to rate change) 1. Gaur Siddartham 2476 7.50% 3.50% 2. Gaur City-I (1st Avenue] 1668 NIL NIL 3. Gaur City-1(4th Avenue] 680 NIL NIL 4. Gaur City-1 (5th Avenue] 1320 NIL NIL 5. Gaur City-1 (6th Avenue) 1118 NIL NIL 6. Gaur City-1 (7th Avenue) 2888 60% Carpet Area upto 60 Sq. Mtr-3.5% other-6% 7. Gaur City-1 (7th Avenue High street) 92 4% 4% 8. Gaur City-2 (City Arcade) 119 4% 4% 9. Gaur City-2 (City Galleria) 146 Nil NIL 10. Gaur City-1 (City Plaza) 218 NIL NIL 11. Gaur City-1 (Gaur City Center} 3638 4% 4% 12. Gaur City Mall (Office Spaces) 1373 4% 4% 13. Gaur Mall (Gaur Suits) 135 4% 4% 14. Gaur City-2 (Sanskriti Vihar) 1079 NIL NIL 15. Gaur City-2 (11th Avenue) 2000 NIL NIL 16. Gaur City-2 (12th Avenue) 4813 Tower A to G & K-4% Tower H,I,J,L,M,N,V-6% Area upto 60 Sq. Mtr. Tower A to G & K 2.67% Tower H,I,J,L,M,N,V-3.50% others As as period rate 18. Gaur City-2....
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....)(a) Notwithstanding anything contained in sub-rule (4), where upon receipt of the report of the Director General of Anti-profiteering referred to in sub-rule (6) of rule 129, the Authority has reasons to believe that there has been contravention of the provisions of section 171 in respect of goods or services or both other than those covered in the said report, it may, for reasons to be recorded in writing within the time limit specified in sub-rule (1), direct the Director General of Anti-profiteering to cause investigation or inquiry with regard to such other goods or services or both, in accordance with the provisions of the Act and these rules. (b) The investigation or enquiry under clause (a) shall be deemed to be a new investigation or enquiry and all the provisions of rule 129 shall mutatis mutandis apply to such investigation or enquiry." 52. It has also been observed from the record that Vide Report dated 23.10,2018 furnished under Rule 129 (6) it was submitted by the DGAP that the complaint filed by the Applicant No. 1 was not covered under the anti-profiteering measures. However, when this Authority had directed to reinvestigate the case vide its order dated....