TaxTMI 
TaxTMI 
2020 (9) TMI 160
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....e Respondent's project "PARKWEST-EMERALD", situated at 1 & 1, 1, Hosakerehalli Main Road, Binnyfields, Binny Pete, Jagajeevanram Nagar, Bengaluru, Karnataka-560023. The above Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him, on implementation of the GST w.e.f. 01.07.2017, in terms of Section 171 (1) of the CGST Act, 2017. 2. The Karnataka State Screening Committee on Anti-profiteering had examined the said application and observed that the Respondent had not passed on the appropriate benefit of input tax credit to the above Applicant as the additional input tax credit available to the Respondent should have been apportioned against the instalments towards the price of the flat. The Karnataka State Screening Committee had forwarded the said application with its recommendation, to the Standing Committee on Anti-profiteering for further action in terms of Rule 128 (1) of the above Rules. 3. The aforesaid reference was examined by the Standing Committee on Anti-profiteering, in its meeting held on 11.04.2019, the minutes of which were received by the DGAP on 02.05.2019, whereby it was decided to forward the same to the ....
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.... its order dated 31.10.2019, in terms of Rule 129 (6) of the Rules. 8. In response to the Notice dated 13.05.2019, the Respondent has submitted his replies vide letters/e-mails dated 28.05.2019, 17.06.2019, 29.06.2019, 25.07.2019, 16.08.2019, 19.08.2019, 19.10.2019, 21.10.2019, 06.12.2019, 17.12.2019, 19.12.2019 and 26.12.2019. 9. Vide the aforementioned letters/e-mails, the Respondent has submitted the following documents/information before the DGAP:- a. Copies of GSTR-1 Returns for the period from July, 2017 to April, 2019. b. Copies of GSTR-3B Returns for the period from July, 2017 to April, 2019. c. Copy of Electronic Credit Ledger for the period from 01.07.2017 to 30.04.2019. d. Copies of Tran-1 Statements for the period from July, 2017 to December, 2017. e. Copies of VAT & ST-3 Returns for the period from April, 2016 to June, 2017. f. Copies of all demand letters, sale agreement/contract issued in the name of the Applicants. g. CENVAT/Input Tax Credit Register for the period from April, 2016 to April, 2019. h. Copies of Balance Sheets for FY 2016-17 & 2017-18. i. Tax rates, pre-GST and post....
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....) shall be such as might be prescribed and shall include supplies on which the recipient was liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". Therefore, the DGAP has further stated that the input t credit pertaining to the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling prices of such units to be sold to the prospective buyers by considering the proportionate additional input tax credit available to him post-GST. 12. The DGAP has also submitted that in response to the Notice of Initiation of investigation dated 13.05.2019. the Respondent vide his submissions dated 29.06.2019 has stated that the allegation made by the Applicant No. 1 that the benefit of input tax credit by way of commensurate reduction in price was not passed on to him was untrue in as much as he had already passed on the benefit of the additional input tax credit which has accrued to him on account of implementation of GST, by way of a corresponding reduction in the price on the demand invoices raised on the above Applicant post imp....
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....ndent due to advent of GST on the works contract services. This credit was now available to the him under GST regime only due to increase in the rate of tax under the GST vis-à-vis the earlier regime. Thus, the same must be reduced from the post-GST ITC availed by him. Further, under the pre-GST regime, services were subject to Service Tax at the rate of 15.00%. and the Respondent was eligible to avail Cenvat credit of these input services. Under the GST, in most of the cases. services were taxable @ 18.00%. Therefore, there was an increase by 3.00% (18.00% -15.00%) of the ITC available to him. It was submitted that this benefit of extra 3.00% was not due to introduction of GST but due to increase in the rate of tax from 15.00% to 18.00% and therefore, the same should not be considered as a benefit due to GST and accordingly Rs. 3.66,781/- must be reduced from the GST Input tax credit. b. Input tax credit of GST pertaining to work done in the pre-GST should not be considered in the GST Regime credit: In construction sector, the goods and services were provided before the invoice was raised based on the various internal approvals of the work done an....
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....f payment as per the contract. However, the work completed upto 30.06.2017 was only 53%. The same could be verified from the RERA certificate of PARKWEST-EMERALD project. Therefore, it could be seen that 90% of the billing had been done for 53% of the work done and in the GST regime, balance 10% billing had been done as against 47% of the work done. Thus, it could be said that there was no synchronization between the work done and the billing which has also led to no synchronization between the credit availment and the billing. It was also submitted that in order to determine the true profiteering amount, it was important to synchronize the work done / credit with the billing raised on the customers. Since, only 10% of the billing had been done in the GST regime, even input tax credit in synchronization to the same must be considered for anti-profiteering and the balance credit for the 37% of work done for which billing had already been done in the pre-GST regime must be excluded from the GST input tax credit. The Respondent has also furnished the following details in support of his above claim:- Particulars Total Post-GST Total Credit in GST Regime 4,70,69,461....
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....st GST must be computed based on the area relevant to the turnover in the said regime: It could be seen from Table-1 that the gross turnover was Rs. 84,70,76,887/(2016-17) and Rs. 9,06,12,248/-(Apr-Jun 2017). Therefore, the total gross turnover was Rs. 93,76,89,135/. Further, total area of the project was 3,24,725 sq. ft. whereas the turnover was only for 3,17,887 sq. ft. Therefore, the total credit of Rs. 3,25,14,990/- must be re-computed based on the area relevant to the turnover. Therefore, the credit of Rs. 3,18,30,295/- (3,25,14,990*3,17,687/3,24,725) must be considered for determining the benefit derived by the Respondent. Similarly, in the post GST regime, the total turnover was Rs. 27,93,70,499/ and the area relevant to the turnover was 3,15,742 sq. ft. The credit of Rs. 92,89,997/- as computed in for 3 above must be re-computed after giving effect to the credit mentioned in above para. Therefore, the revised figure of credit would be Rs. 90,33,0041-(92,89,997*3,15,742/3,24,725). The customer-wise break-up of the above stated gross turnover was given in Annexure-6. Revised Table by considering the above points was submitted by the Respondent as follows:- ....
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....and cognate expressions means every transfer of the property in goods (other than by way of a mortgage, hypothecation, charge or pledge) by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes, - c) The provisions relating to input tax credit, as contained in Section 10 of the KVAT Act were as under:- 10. Output tax, input tax and net tax- (1) Output tax in relation to any registered dealer means the tax payable under this Act in respect of any taxable sale of goods made by that dealer in the course of his business, and includes tax payable. (2) Subject to input tax restrictions specified in Sections 11, 12, 14, 17 and 18 input tax in relation to any registered dealer means the tax collected or payable under this Act on the sale to him of any goods for use in the course of his business, and includes the to on the sale of goods to his agent who purchases such goods on his behalf subject to the manner as might be prescribed to claim input tax in such cases. (3) Subject to input tax restrictions specified in Sections 11, 12, 14. 17, 18 and 19, the net tax paya....
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....e Duty levied on the goods was not admissible to him in the pre-GST regime. On advent of GST, entire credit on purchases was now available to him. Thus, the additional benefit on introduction of GST was only the component of Excise Duty with respect to the materials used in the execution of the project during the GST period. It could be seen that the total assessable value of procurement was Rs. 4,40,18,823/- and Excise Duty benefit (@ 12.5%) on the same would had been Rs. 55,37,1081- which needed to be passed on to the customers u/s 171 of CGST Act 2017. The HSN wise details of the materials procured along with the rate of Excise Duty have been given as under:- Sr. No. Name of Material HSN Code Rate of Excise Duty 1. Sanitary Fittings Chapter 73 or 74 or 76 (depending on the material) 12.50% 2. Doors Chapter 44. 4418 12.50% 3. Electrical Equipment and Item Chapter - 84. 12.50% 4. Furniture Chapter 94. 9403/9405 12.50% 5. Sliding Window Chapter - 76. 7610 12.50% 6. Tiles Chapter - 69. 12.50% The Respondent had estimated that the amount of benefit would be Rs. 50,37,790/- on the bas....
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....5% 2. June 2017 53% 90% 3. March 2019 100% 100% Therefore, it could be seen that 90% of the billing had been done for the 53% of the work done in the pre-GST period and in the GST regime, balance 10% billing had been done as against 47% of the work done. Thus, it could be said that there was no synchronisation between the work done and billing which also led to no synchronisation between the credit availment and billing. It was also submitted that in order to determine the correct profiteering amount, it was important to synchronize the work donetcredit with the billing raised on the customers. Hence, 37% (90%-53%) of work done in the post-GST period did net pertain to the corresponding billing in the post-GST period. Therefore, GST input tax credit on 37% of work done corresponded to the pre-GST billing to customers and thus there was no actual benefit which has accrued to the customers by comparison of Input-Output ratios. 15. The DGAP has also claimed that the Respondent has submitted that the credit on input services was admissible to him under Rule 2 (I) of the Cenvat Credit Rules 2004 which was utilized to pay the Service Tax. The ....
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....ve been mentioned as under:- a. The profiteering working prepared by the DGAP was incorrect as the DGAP had compared the credit vis-a-vis turnover and computed the benefit arising under the GST. It was submitted that the profit to the Respondent had remained the same irrespective of the rate of GST charged on the product. The same could be seen from the following Table-A where it was assumed that the sale price was Rs. 120/-. Table 'A' (Amount in Rs.) S.No. GST Rate of Input Cost of Input GST Amount Total Invoice Value ITC Under GST Net Cost of Company Selling Price Gross Profit Ratio as per DGAP working (A) (B) (C) (D)=C*B (E)=C+D (F)=D (G)=E-F (H) (I)=H-G (J)=D/H 1. 28% 100 28 128 28 100 120 20 23.33% 2. 18% 100 18 118 18 100 120 20 15.00% 3. 12% 100 12 112 12 100 120 20 10.00% 4. 5% 100 5 105 5 100 120 20 4.17% It could be seen that just because the GST rate had increased/decreased on a particular product, the ITC working done by the DGAP had changed drastically. However, the gr....
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....er intimation to the home-buyers and reduction in the basic cost on account of GST benefit extended in compliance of Section 171 being duly mentioned with description as "Less: Reduction towards Section 171 of the CGST Act, 2017", in the demand letters, such benefits extended by the Respondent shall be accounted for in determination of amount of profiteering and properly adjusted. c. Without prejudice to other submissions, it was submitted by the Respondent that the benefit received due to increase in the rate of credit needed to be distributed to the customers. In the given case, the Respondent had received average input tax credit at the rate of 12%, i.e, 6% CGST and 6% SGST. In the state of Karnataka, the Respondent was allowed to avail the credit of VAT on inwards. The computation of VAT credit as per the provisions of KVAT Act, was as follows:- Total project cost = Rs. 100 Land Cost 30% = Rs. 30 Construction Cost = Rs. 70 (Rs. 100 (-) Rs. 30) Material Cost was 70 % of Construction Cost = Rs_ 49 (70% of Rs. 70) VAT levied at the rate of 14.5% = Rs. 7 (approx.) Thus, it could be seen that the Respon....
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....rs GST Impact Tax Benefits due to GST ED impact on actual materials procured from Jul-17 till handover 55,02,353 Total Cost impact on account of GST (A) 55,02,353 Total Saleable area to be constructed (In Sq. Feet) (C) 3,24,725 Total Area sold till date of introduction of GST (In Sq. Feet) (D) 3,17,887 Value of Cost reduction to be passed to the customer E- (A*D/C) 53,86,485 Statement of benefits to be passed on to the customer Particulars Balance Demand note to be issued for a executed portion of development (In Rs) 29,18,92,241 Benefits on account of GST to be passed on to the customers (In Rs) 53.86,485 Reduction to be passed on to the customers on balance value (In %) 1.84% The Respondent had already passed on 2.0% benefit. Thus, he had already passed on additional benefit of 0.16% (2.0% - 1.54%). On this issue, the DGAP has stated that the Respondent's contention regarding item wise incidence of tax and availability of input tax credit in the pre and the post-GST era....
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....n the excess ITC was nothing but cost to the Respondent. The ratio computed by the DGAP for arriving at profiteering' amount did not take this into consideration. Hence, the same was flawed and could not be relied upon. The DGAP has stated that the Respondent's contention regarding refund of overflow of credit for the service being provided by him couldn't be ascertained by the DGAP and hence the contention of no refund of overflow of credit had not been looked into. However, prima facie it appeared that as the taxable value of output service being provided by the Respondent was more than the value on which credit was availed, hence, there should not be any overflow or excess credit that has accrued to the Respondent. b. Reversal of credit at the end of the project: As per Schedule-III "Sale of land and, subject to clause (b) of para 5 of Schedule-II" sale of building" was neither supply of goods nor supply of service. Para 5 (b) of Schedule-II reads as follows:- "(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 cons....
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....s as follows:- Particular Amount Selling Price of Flat (assuming 20% profit margin) A 120 Total Cost of Flat B 100 Less: Land Cost @31% of selling price C = 31% of A (37.20) Construction cost D=B(-)C 62.80 Less 40% of construction cost towards pure services like labour E = 40% of D (25.12) Cost of Material F = D (-) E 37.68 Less: Non-Excisable material cost (like sand) G = 40% of F (15.07) Cost of Excisable material H = F (-) G 22.61 Excise Duty @12.50% included in the above cost I=H/112.5*12.5 2.51 Percentage of Excise Duty on selling price H = I/A*100 2.09 Balance demand to be raised as on 30th June 2017 was 55% Benefit of Excise Duty on selling price to be passed on the to the customers was 55% of Excise Duty to be passed K = 55% of J 1.15% The Respondent had passed on the benefit at the rate of 2.5% on the balance demand. Thus, the Respondent had already passed on additional benefit of 1.35% (2.5% -1.15%). ii. Without prejudice to other submissions, it was submitted that the benefit received due to increase in the rate of credit needed to be di....
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....t on actual materials procured from Jul-17 to Sept-19 2,85,34,060 ED impact on Materials required for Balance completion as on sept 5,41,49,645 Total Cost impact on account of GST (A) 8,26,83,705 Total Saleable area to be constructed (In Sq. Feet) (C) 7,82,263 Total Area sold till date of introduction of GST (In Sq. Feet) (D) 5,19,454 Value of Cost reduction to be passed to the customer F- (A*D/C) 5,49,05,296 Statement of benefits to be passed on to the customer Particulars Balance Demand notes to be issued for unexecuted portion of development (In Rs) 2,43,77,19,741 Benefits on account of GST to be passed on to the customers (In Rs.) 5,49,05,296 Reduction to be passed on to the customers on balance value (In %) 2.25 The Respondent had already passed on 2.5% benefit. Thus, he had already passed on additional benefit of 0.25% (2.50% - 2.25%). The DGAP has also stated that the above contention of the Respondent was reiteration of facts already given for the other project "PARKWEST-EMERALD" and only the benefits as already passed on were accounted for while computing the amount of profiteeri....
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....ssuance of Completion Certificate. 21. The DGAP has also stated that the Respondent has further contended that he had duly intimated his all customers regarding passing on of the benefits on account of introduction of GST. The Respondent's contention in this regard was in line with the documents submitted by both the Applicants. wherein they had claimed that the benefits passed on to them were not adequate and commensurate with the additional benefits that would accrue consequent upon the implementation of GST. The communication made by the Respondent with his home-buyers and the demand letters issued post-GST were examined on a random basis to verify this claim and the veracity of claims was found to be true by the DGAP. Reference might be made to the communication from the Respondent to the Applicant No. 2 made on 18.10.2017, wherein the Respondent has mentioned that on account of GST implementation, it was expected that there would be a reduction in the cost of construction due to abolition of erstwhile taxes. The relevant text of the Respondent's impugned letter has been reproduced by the DGAP below:- "At this stage, the implementation of GST was under progress acro....
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.... against the liability arising out of sale of flats and usually at the end of construction stage finishing activities were carried out for which huge expenses were incurred on tiles, marble and bathroom fittings etc. The Respondent was entitled to input tax credit on the GST charged on such items and it was possible that the output liability at that stage was much less than the ITC accrued. The excess ITC accrued to the Respondent could not be claimed as refund owing to the restriction imposed vide Notification No. 15/2017- Central Tax (Rate) dated 28.06.2017. In light of the above, the Respondent has submitted that there was no guarantee that the ITC accrued to the Respondent would get utilized against the output liability and if the output liability was lesser than the ITC accrued, then this excess ITC was nothing but cost to him. The Respondent has further submitted that the ratio arrived at by the DGAP for arriving at profiteering amount did not take this into consideration and hence it was flawed and could not be relied upon. 23. The DGAP has also stated that the Respondent's claim that as per Schedule-III "Sale of Land" and subject to clause (b) of para 5 of Schedule-II- "....
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....ice Sheet and subject to the agreement with the benefits so offered, agreement between the builder and the buyers for the units was signed. As the benefit on account of input tax credit had already been accounted for this category of home-buyers hence, the benefit so passed was not even reflected as turnover in the statutory returns or home-buyers list and the relevant turnover and the area had not been taken into account, for the purpose of calculation of profiteering or else it would have a cascading effect on calculation of profiteering. In the home-buyers list provided by the Respondent all such home-buyers were identifiable from the date of booking and status as "Live NBPID". The DGAP has contended that only those home-buyers who were existing as on the date of implementation of the GST i.e. 01.07.2017 and from whom further demands had been raised were the subject of this investigation to determine whether benefit commensurate to the additional ITC available had been passed on to them or not. Those home-buyers who had entered into agreement to purchase units, after implementation of GST, after accepting the one time reduction in the base price towards benefits of input tax cre....
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....cates had already been received for the PARKWEST-OLIVE, PARKWEST-EMERALD and PARKWEST-MULBERRY phases and possession of units had been handed over to the home buyers. In case of PARKWEST-MAPLE, the work had commenced on 25.10.2016, whereas work had commenced for another phase PARKWEST-SAPHIRE only after implementation of the GST w.e.f. 21.02.2018 (date of commencement certificate) and the last two phases were yet to be completed. As PARKWEST-EMERALD phase had commenced before implementation of the GST and Completion Certificate had been obtained for the same, the benefit of actual additional input tax accruing for this phase could be ascertained easily whereas for the PARKWEST-MAPLE, the purview of this investigation was limited only up to the period covered in this investigation. The DGAP has further mentioned that If different towers were considered as one project and credit of one tower was clubbed with the other tower, it could jeopardize the interest of the home-buyers of one tower at the cost of another. Further, given the different stages of construction of each tower, the Completion Certificates received for some of them, whereas others being in different stages of construc....
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....r the KVAT Regular Scheme, he was eligible to avail input tax credit of VAT paid on the inputs. Further, post-GST, the Respondent could avail the input tax credit of GST paid on all the inputs and input services. From the information submitted by the Respondent for the period from April, 2016 to April, 2019, the details of the input tax credit availed by him, his turnover from the project "PARKWEST-EMERALD" and "PARKWEST-MAPLE", the ratios of input tax credit to the turnovers, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to April, 2019) periods, have been furnished by the DGAP as is given in Table-'B' and 'C' below: Table- B (Amount in Rs.) S. No. Particulars (Pre-GST) April, 2016 to June, 2017 (Post-GST) July, 2017 to December, 2018 1. Credit of Service Tax Paid on Input Services (A) 2,26,47,009 - 2. Input Tax Credit of VAT Paid on Inputs (B) 2,24,41,497 - 3. Total CENVAT/VAT/Input Tax Credit Available (C)= (A+B) 4,50,88,506 - 4. Input Tax Credit of GST Availed (D) - 2,69,66,615 5. Total Turnover from Residential and Commercial Area (E) 93,76,89,135 28,41,61,628 6. Total ....
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....ed 28.06.2017. Accordingly, the profiteering had been examined by comparing the applicable tax rate and input tax credit available to the Respondent during for the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.5% and VAT@ 14.50% on the construction value were leviable (total tax rate was 11.6% on the basic price) with the post-GST period (July, 2017 to April, 2019) when the effective GST rate was 12% on the gross value. 32. On the basis of the figures contained in Table-B' and 'C' above, the comparative figures of input tax credit availed/available as a percentage of the turnover in the pre-GST and the post-GST periods, the recalibrated base prices as well as the excess collection (profiteering) during the post-GST period, have been tabulated by the DGAP as is given in Table-'D' and 'E' below:- Table-D (Amount in Rs.) S.No. Particulars Pre-GST Post-GST 1. Period A April, 2016 to June, 2017 July, 2017 to April, 2019 2. Output tax rate (%) B 11.60% 12.00% 3. Ratio of CENVAT/VAT/GST Input Tax Credit to Total Turnover as per Table - B above (%) C 4.70% 6.69% 4. Increase in input ta....
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.... 3,03,94,113 33. From the Table-'D' above, the DGAP has stated that the additional input tax credit of 1.99% of the turnover should have resulted in commensurate reduction in the basic prices as well as cum-tax prices for the home-buyers of the project "PARKWEST-EMERALD". Similarly, From Table-'E' above, it was clear that the additional input tax credit of 3.62% of the turnover should have resulted in commensurate reduction in the basic prices as well as cum-tax prices for the home-buyers of the project "PARKWEST-MAPLE". Therefore, in terms of Section 171 of the CGST Act, 2017, the Respondent had not reduced the basic prices for the buyers of these two projects commensurate to the additional benefit accrued and this benefit of the additional input tax credit was required to be passed on by the Respondent to the recipients. In other words, by not reducing the pre-GST basic prices on account of additional benefit of input tax credit and charging GST @12% on the pre-GST basic prices, the Respondent appeared to have contravened the provisions of Section 171 of the CGST Act, 2017. 34. On the basis of the aforesaid CENVAT/input tax credit availability in the pre and the post-GS....
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....the Respondent, inasmuch as the benefit of additional input tax credit on the demand raised by the Respondent during the post-GST period from 01.07.2017 to 30.04.2019, had not been commensurately passed on to the above Applicant and the other recipients. On this account, the Respondent had realized an excess amount to the tune of Rs. 74,929/- from the Applicant No. 2 which included both the profiteered amount on the basic price to the tune of Rs. 66,900/- and the GST on the said profiteered amount. Further, the investigation has revealed that the Respondent had realized an excess amount of Rs. 3,13.61,443/- (Rs. 9,67,330+ Rs. 3,03,94,113) on both the above projects which included both the profiteered amount on the basic prices and GST on the said profiteered amount. All the recipients were identifiable as the Respondent had provided their names and addresses along with unit nos. allotted to them. Therefore, this additional amount of Rs. 3,13,61,443/- was required to be returned to all the eligible recipients including the Applicant No. 2. 37. The above Report was considered by this Authority in its meeting held on 04.02.2020 and it was decided that the Applicants and the Respond....
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....iteering. On the basis of this calculation, the DGAP has computed profiteering amount of Rs. 66 Lakh. The Respondent has submitted that the DGAP has not considered the facts mentioned below while calculating the profiteering:- a. In the construction industry, the credit may accumulate in a particular period but the tax liability with respect to the same might arise in a different period. b. The total profiteered amount as calculated by the DGAP was Rs. 63.33 Lakh (inclusive of tax) which included Rs. 35,463/- (inclusive of tax) to be passed on to the Applicant No. 1. He has collected Rs. 2,669/- excess from the above Applicant on account of GST. The extra tax collected was Rs. 2,6691- but the benefit to be passed on as per the DGAP was Rs. 35,463/- which itself showed that there was gross error in the calculation made by DGAP. c. There was increase in the amount of input tax credit availed by the Respondent in the post-GST regime due to increase in the rates of tax. Tax rate on the works contract service under the pre-GST regime was 16.15% i.e. VAT 10.15% (14.50% X 70%) and Service Tax @ 6.00% (15.00% X 40%). However, after the GST was implemented, the ra....
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....Respondent has also claimed that the method of computation of GST benefit by the DGAP has led to irrational results when the gross profit and cost of the Respondent has remained constant. The DGAP has compared the credit vis-a-vis the turnover and has computed the benefit arising under the GST. It was submitted that the profit to the Respondent has remained same irrespective of the rate of GST charged on the material. It was further submitted that the entire exercise undertaken by the DGAP was to find out whether any 'Profiteering' has been done by the Respondent on account of introduction of GST. As per Section 171, any benefit arising due to advent of GST was to be passed on to the customer. Therefore, anything that was a 'cost' in the pre-GST period and was no more a cost to the Respondent in the GST regime was the benefit which needed to be passed on to the customers. 43. The Respondent has further claimed that the DGAP has computed the profiteered amount as Rs. 63.33 Lakh for the PARKWEST-EMERALD project. This amount included the base price as well as 12% GST on the same. The profiteered base price was Rs. 56,54,816/-. The balance amount of Rs. 6,78,578/- was towards the GS....
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....rence Value (Rs.) 2% - AP (Rs.) Remark 10% of Amount paid in GST 15,91,132 31,823 Benefit Passed 47% of Works executed in GST (Rs. 15,91,132/10%*47% 74,78,320 1,49,566 Estimated to be Passed Short paid 1,17,744 Profiteering He has also submitted that as per his computation, Rs. 1.17 Lakh additionally should be paid back by the Respondent to him for his unit. 47. The above Applicant has further depicted the percentage of ITC on the expenses incurred by the Respondent as follows:- Particulars Pre GST Post GST Turnover 93,76,89,135 27,93,70,499 CENVAT/ITC 4,50,88,505 4,70,69,461 4.81% 16.85% He has claimed that the above Table indicated that the ITC benefits were higher in the GST regime. 48. The Applicant No. 1 has also submitted that the profiteering working was applied only on Rs. 92 Lakh by the DGAP. In this regard he has claimed that most of the ITC benefit was available in the GST era owing to the Excise Duty credits. The Respondent had agreed that most of the ITC has accrued at the finishing stage on the purchase of the tiles, marble and bathroom fittings etc., there....
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....in base price as well cum tax price for all the home buyers was arrived at and was proposed to be passed on to each recipient. 55. On the issue of percentage of ITC on the expenses incurred, the DGAP has stated that the contention of the Applicant No. 1 was not relevant as the profiteering calculation proposed by him had not looked into the aspect of ratio of the ITC (%) on the expenses incurred. The investigation was limited to the accrual of additional benefit of input tax credit as mandated under Section 171 of CGST Act, 2017. 56. On the issue of excess ITC towards the end of the project, the DGAP has stated that the contention of the above Applicant was not relevant as the ITC accrued post GST period had been taken into record in his Report and the investigation was limited to the accrual of additional benefit of input tax credit as mandated under Section 171 of CGST Act, 2017. 57. On the issue of mismatches in the purchases made by the Respondent, the DGAP has stated that the contention of the above Applicant was not relevant as the profiteering calculation methodology used by the DGAP had not looked into the aspect of costing of the project and future cost yet to be ....
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....pted. 61. The Respondent has also submitted that the Applicant No. 1 had pointed out that the ratio of credit to the turnover in the pre-GST regime was 4.81% whereas in the post GST regime it was 16.85% which indicated that the input tax credit benefits were higher. It was submitted that the Respondent had already furnished detailed response in his submissions dated 25.02.2020 to substantiate that the ratio of input tax credit being higher in post-GST regime did not automatically translate into additional GST benefit to the Respondent and various other factors needed to be considered. The Respondent had computed the benefit on his own accord and passed on 2% benefit. 62. The Respondent has further submitted that the Applicant No. 1 has claimed that majority of the ITC has accrued in the end stage of the project and therefore, the entire ITC availed in the GST regime must have been considered for calculation of profiteering. The Respondent has added that the claim made by the Applicant No. 1 had already been accepted by the Respondent that a lot of ITC accrued at the end stage of the project which would happen in the GST regime. However, the same needed to be synchronised with....
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.... These complaints were examine by the Standing Committee on Anti-Profiteering in its meetings held on 11.04.2019 and 13.09.2019 respectively and were forwarded to the DGAP for investigation who vide his Report dated 31.01.2020 has found that in respect of the project "PARKWEST-EMERALD" the ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was 4.70% and during the post-GST period this ratio was 6.69%, as per the Table-B mentioned above and in respect of the project "PARKWEST-MAPLE" the ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was 1.97% and during the post-GST period this ratio was 5.59%, as per the Table-C mentioned above. Therefore, the Respondent has benefited from the additional ITC to the tune of 1.99% (6.69% - 4.70%) and 3.62% (5.59% - 1.97%) of the total turnover in respect of the projects PARKWEST-EMERALD and PARKWEST-MAPLE respectively which he was required to pass on to the flat buyers of these projects. The DGAP has also found that the Respondent has not reduced the basic prices of his flats by 1.99% in case of the project PARKWEST-EMERALD and 3.62% in c....
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....o each home buyer as per Annexure-21 and 22 in respect of both the above projects. However, no benefit has been computed on the unsold area so that in case it remains unsold till the Occupation Certificate is received the ITC could be reversed on it. Therefore, the mathematical methodology employed by the DGAP to compute the above ratios as well as the profiteered amount as per the Tables C to E supra is logical, reasonable, appropriate and in consonance with the provisions of Section 171 (1) of the above Act. The above mathematical methodology has also been approved by this Authority in all such cases of real estate sector where benefit of additional ITC is to be passed on and hence the same can be relied upon. 66. The Respondent has submitted that after coming in to force of the GST he had become entitled to the ITC of Excise Duty only which amounted to Rs. 55,02,353/- in respect of the PARKWEST-EMERALD project as per Annexure-2 and Rs. 2,85,34,060/- for the PARKWEST-MAPLE project as per Annnexure-8 submitted by him and hence, he was required to pass on the above amounts only as the benefit of ITC. In this regard it would be pertinent to mention that there is no provision in S....
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.... DGAP is not required to investigate the benefit of ITC on each good and service purchased by the Respondent as the entire amount of additional ITC has to be taken in to account for passing on its benefit. Accordingly, the above claim of the Respondent cannot be accepted. 68. The Respondent has further submitted that 53% of the work in the PARKWEST-EMERALD project had been completed in the pre-GST period and material in the post GST period as per Annexure-2 was purchased to complete the balance 47% work. Since, only 10 percent amount was demanded from the buyers in the post GST period as 90% amount had already been received in the pre-GST period, therefore, only an amount of Rs. 11,70,713/- was required to be passed on as benefit of ITC. The above contention of the Respondent is not tenable due to the reason that the benefit has to be computed on the basis of the additional ITC as well as the turnover received by the Respondent during the post-GST period and it has no connection with the percentage of work completed or percentage of the amount received or purchases made by the Respondent. 69. The Respondent has also claimed that the computation of the profiteered amount as pe....
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.... shows that the ratio of CENVAT/VAT to total turnover during the pre-GST period was 4.70% whereas it was 6.69% during the post-GST period in respect of the PARKWEST-EMERALD project. Hence, the Respondent has received additional benefit of 1.99% of the turnover in respect of the above project. The Respondent has not produced any evidence to establish that in case there was increase in the rate of tax he was not given ITC on the increased rate of tax and he had to bear the extra burden of tax. The Respondent has also received the benefit of ITC in the shape of reduced prices of the goods and services purchased by him from his suppliers as they have also become entitled to the benefit of ITC in the post-GST period. Therefore, the above contention of the Respondent is not established from the record and hence, an amount of Rs. 24,814/- and Rs. 13,52,876/- cannot be reduced from the ITC due to increase in the rate of Service Tax and the Works Contract Tax. 72. The Respondent has further claimed that the ITC available on the work done in the pre-GST period should not be considered in the post-GST period as the invoices in the construction sector are issued after the goods and services....
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....as only 53%. Therefore, it is clear that the benefit of ITC has to be computed on the basis of the ITC available to the Respondent and the turnover received by him at a particular time. The Respondent had no right to raise 90% of the demand against the 53% work done in the pre-GST period. Therefore, the excess demand of 37% raised in the pre-GST period was illegal and incorrect. Therefore, an amount of Rs. 2,00,34,421/- of pre-GST ITC on the illegally raised excess demand of 37% cannot be excluded from the post-GST ITC. As the Respondent is availing benefit of ITC every month to discharge his tax liability he also has to pass on the benefit every month. The buyers cannot be compelled to wait till the completion of the project to avail benefit of ITC. In case of less or more payment of benefit of ITC to the buyers the Respondent can always adjust the amount subsequently. Therefore, no synchronisation is required to be done between the ITC and the turnover while passing on the benefit of ITC. 74. The Respondent has also argued that during the pre-GST period total billing of 35% was done as per the invoices attached as Annexure-7. As the ITC for 37% work was Rs. 2,00,34,421/- the I....
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....y evidence. Therefore, the ratios computed by the DGAP are correct and reliable. Therefore, the above claims of the Respondent are frivolous and hence the same cannot be accepted. 75. The Respondent has stated in respect of the project PARKWEST-MAPLE that the benefit has to be passed to the extent of the Excise Duty of Rs. 2,85,34,060/- which he had paid on the purchase of the material as per the details given in Annexure-8. In this connection it is reiterated that the benefit has to be calculated on the entire additional ITC which has become available to the Respondent and it cannot be restricted to the amount of Excise Duty. The DGAP could not have computed the benefit input wise as there is no such provisions in Section 171. The Respondent cannot misappropriate the ITC other than which he has earned on account of Excise Duty as it has been granted to him out of the public exchequer in the interest of the buyers. Therefore, the above claim of the Respondent cannot be accepted. 76. The Respondent has also stated that maximum purchases are made at the time of finishing of the project due to which huge ITC is generated which cannot be utilised as per the provisions of Notifica....
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....paid an amount of Rs. 59,73,300/- post-GST on which he was entitled to the ITC benefit of Rs. 2,16233/- out of which benefit of Rs. 1,49,333/- has already been passed on by the Respondent. Hence, he is entitled to the benefit of Rs. 66,900/- + Rs. 7,329/- as GST which comes to Rs. 74,229/-. Therefore, the computation of Rs. 37,290/- as excess GST claimed by the Respondent is incorrect and hence it cannot be accepted. 79. The Respondent has also claimed that there has been increase in the rates of tax on the services and the works contracts and hence no additional benefit of ITC has accrued to him. He has further claimed that the ITC pertaining to the pre-GST period should not be counted in the post-GST period and an amount of Rs. 14,94,078/- as per Annexure-9 should be reduced from the ITC pertaining to the post-GST period. Both the above issues have been dealt in detail in Para supra and hence they are not being discussed here. Since both the above claims of the Respondent are frivolous they cannot be accepted. Accordingly, the above amount of Rs. 14,94,078/- cannot be reduced from the post-GST ITC. Similarly the ITC on the brokerage paid to Mr. Sanjay H. Sethiya vide invoice N....
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....ed by the Respondent on the additional benefit of 0.85% is completely incorrect and hence the same cannot be accepted. 82. The Respondent has also argued that the computation of profiteered amount made by the DGAP was wrong as the gross profit and cost of the Respondent had remained same as was evident from Annexure-14. In this regard it would be relevant to mention that the benefit of additional ITC has to be calculated on the basis of the additional ITC which has become available to the Respondent during the post-GST period as compared to the ITC which he had earned during the pre-GST period and the cost and gross profit of the Respondent has no connection with passing on of the benefit. Section 171 of the Act also does not provide that both the above factors are required to be considered while passing on the benefit of ITC. Therefore, the above contention of the Respondent is untenable. 83. The Respondent has also pleaded that an amount of Rs. 6,78,578/-collected as GST in respect of the PARKWEST-EMERALD project and an amount of Rs. 76,74,175/- collected as GST on the PARKWEST-MAPLE project has been deposited with the Government and hence the same cannot be treated as the ....
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....ondent has collected 47% amount in the post-GST period the ITC benefit should be passed on the 47% value. He has further stated that the benefit which has accrued to the Respondent has less nexus with the amount received by him and more with the work completed. In this context it would be relevant to mention that 47% is the percentage of completion of the work achieved by the Respondent and not the percentage of the amount collected by him. As explained in para supra percentage of completion of work has no correlation with the amount of benefit as it has to be computed on the basis of the comparison of the CENVAT/VAT/ITC and the turnovers received by the Respondent during the pre and the post-GST periods and hence, the above contention of the above Applicant cannot be accepted. 86. The above Applicant has also submitted that he was entitled to benefit of Rs. 1,49,566/- on account of the 47% work completed in the post-GST period out of which he has received Rs. 31,823/- and balance amount of Rs. 1,17,744/- was still due to him. However, as been discussed above the Applicant is entitled to the benefit of Rs. 31,664/- only in proportion to the consideration which he has paid during....
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....The above Applicant has also contended that the benefit has to be given uniformly and it cannot be passed on the basis of the consideration paid by the home buyer in the post-GST period. He has also cited the cases of flat Nos. E-206, E-104, E-1004, E-1103 etc. in this regard. However, as has been submitted above the benefit has to be passed on the basis of amount of consideration paid by a buyer in the post-GST period. Since, the Applicant No, 1 has already been passed on the benefit of ITC based on the amount of consideration paid by him during the post-GST period no further benefit is required to be passed on to him. Hence. the above argument of the Applicant cannot be accepted. 91. it is established from the perusal of the above facts that the Respondent has benefited from the additional ITC to the tune of 1.99% of the total turnover in respect of the project PARKWEST-EMERALD during the period from July, 2017 to April, 2019 which he was required to pass on to the buyers of the flats of the above project by commensurately reducing the prices of the flats which he has not done and hence he has violated the provisions of Section 171 (1) of the CGST Act, 2017. Accordingly, as pe....
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....ther flat buyers and the Applicant No. 2 respectively along with the interest @ 18% per annum in terms of Section 171 (1) read with Rule 133 (3) (c) of the above Rules from the dates from which the above amounts were collected by him from them till the payment is made Within a period of 3 months from the date of passing of this order as per the details mentioned in Annexure-22 attached with the Report dated 31.01.2020. 93. Accordingly, 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 of the above projects commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 30.04.2019 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on to the eligible flat buyers. In case the above benefit is not passed on by the Respondent the above Applicants or any other buyer shall be at liberty to approach the Karnataka State Screening Committee to initiate fresh proceedings against the Respond....