TaxTMI 
TaxTMI 
2020 (11) TMI 385
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....respect of the purchase of Flats in his "Paradise" project located in Sector-62, Gurgaon. The above Applicants 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 fiats. The aforesaid first application was considered by the Standing Committee on Anti-profiteering, in its meeting held on 13^th December 2018, wherein it was decided to forward the same to the DGAP to conduct a detailed investigation into the allegation made in the complaint according to Rule 129 (1) of the CGST Rules, 2017. The second application was considered by the Standing Committee on Anti-profiteering, in its meeting held on 11^th March 2018, wherein it was also decided to forward the same to the DGAP to conduct a detailed investigation. 2. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP had issued a Notice dated 15.01.2019 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 Applicants by way of commensurate reduction in the price of the flats and ....
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....g all annexures) & ST-3 Returns for the period April 2016 to June 2017. (d) Copies of all demand letters issued and sale agreement made with the Applicant. (e) Copies of Balance Sheet for FY 2016-17& 2017-18. (f) Copy of Electronic Credit Ledger for the period 01.07.2017 to 31.12.2018. (g) CENVAT/lnput Tax Credit register for the FY 2016-17 and 2017-18 and April 2018 to December 2018 (h) Details of VAT, Service Tax, ITC of VAT, CENVAT Credit for the period April 2016 to June 2017, for the project "Paradise". (i) List of homebuyers of the project "Paradise" along with details of benefit passed on. (j) Copy of RERA Registration Certificate of the Project "Paradise". (k) Copy of Tran-1. 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 determination were whether there was a 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 a....
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.... Within 30 months of the date of the Allotment letter Yet to be demanded 12.50% 2,88,688 23,095 3,11,783 8. Within 36 months of the date of the Allotment letter 12.50% 2,88,688 23,095 3,11,783 100.00% 2,309,503 28,869 1,50,118 13,609 24,74,881 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 Il, sale of building". Further, Clause (b) of para 5 of Schedule Il 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 the completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier". In the light of these provi....
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....iod from April 2016 to December 2018, the details of the input tax credit availed by him, his turnover from the project "Paradise" and the ratio of input tax credit to turnover, during the pre-GST (April 2016 to June 2017) and post-GST (July 2017 to December 2018) periods was furnished by the DGAP as per the Table-B given below:- Table-'B' (Amount in Rs.) Sr.No. Particulars Total (Pre-GST) April, 2016 to June, 2017 12% GST (01.07.2017 to 31 .12.2018) (Flats + Shops) 8% GST (25.01.2018 to 31.12.2018) (Flats) Total (Post-GST) (01.07.2017 to 31.12.2018) 1. CENVAT of Service Tax Paid on Input Services used for Commercial Shops (A) 15,15,855 - - - 2 Input Tax Credit of VAT Paid on Purchase of Inputs (B) 3,59,100 - - - 3 Total CENVAT/VAT Credit Available (C)=(A+B) 18,74,955 - - - 4 Input Tax Credit of GST Availed (D) - 49,99,880 1,67,13,313 2,17,13,193 5 Turnover from residential flats as per Home Buyers List (E) 36,42,65,250 - - - 6 Turnover from commercial shops as per Buyers List (F) 1,24,82,710 - - - 7 Total Turnover (G)=(E)+(F) 37,67,47,960 ....
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....C below:- Table-'C' (Amount in Rs.) S. No. Particulars Post-GST period 1. Period A 01.07.2017 to 31.12.2018 (Shops) 01.07.2017 to 24.01.2018 (Flats) 25.01.2018 to 31.12.2018 (Flats) Total 2. Output GST rate (%) B 12 12 8 3. The ratio of Input Tax Credit to Turnover post-GST as per table (%) C 3.1 3.1 3.1 3.1 4. Increase in input tax credit availed post-GST (%) D=3.10% less 0.43% 2.67 2.67 2.67 2.67 5. Analysis of Increase in input tax credit: 6. Base Price raised from July 2017 to December 2018 (Rs.) E 38,118,553 215,870.625 415,839,125 669,828,303 7. GST raised over Basic Price (Rs.) F= E*B 4,574,226 25,904,475 33,267,130 63,745,831 8. Total Demand raised G=E+F 42,692,779 241,775,100 449,106,255 733,574,134 9. Recalibrated Basic Price H=E*(1-D) or 97.33% of E 32,100,788 210,106,879 404,736,220 651,943,887 10. GST on recalibrated basic price @ as applicable I=H*B 4,452,095 25,212,826 32,378,898 62,043,818 11.....
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.... to be passed on and the benefit claimed to have been passed on by the Respondent, was furnished by the DGAP as is given in Table- D below:- Table-D (Amount in Rs) Sr.No. Category of Homebuyers No. of Units Area (in Sqf) Amount Received Post GST Benefit required to be passed on as per Annex-17 Benefit claimed to have been Passed on Difference Remark A B C D E F G H=F-G 1. Applicant (Residential) 1 566 8,66,063 25,282 13,609 11,673 Further Benefit to be passed on as per Annex-18 2. Other Buyers (Residential) 739 3,90,534 63,08,43,688 1,84,21,250 80,34,068 1,03,87,182 Further Benefit to be passed on as per Annex-18 Total Residential (A) 740 3,91,100 63,17,09,751 1,84,46,532 80,47,677 3. Commercial Shop Buyers 23 6,625 3,31,18,553 11,39,897 1,15,119 10,24,778 Further Benefit to be passed on as per Annex-19 4. Commercial Shop Buyers 1 345 0 0 19,987 -19,987 No Consideration Paid Post-GST, However, Respondent passed on benefit. Details as er Annex-20 5. Co....
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.... percentage of turnover would be distorted and erroneous. Therefore, the benefit of the input tax credit in respect of these 4 commercial shops can only be calculated when the consideration would be received in the post-GST period by taking into account the proportionate input tax credit in respect of these 4 commercial shops. 19. The DGAP has also claimed that the benefit of additional ITC of 2.67% of the turnover has accrued to the Respondent and the same was required to be passed on to the above Applicants and other recipients. Thus, the Respondent has contravened the provisions of Section 171 of the Central Goods and Services Tax Act, 2017 since the additional benefit of ITC @ 2.67% of the turnover (base price) received by the Respondent during the period from 01.07.2017 to 31.12.2018, had not been passed on by the Respondent to the above Applicants and 761 other recipients. On this account, the Respondent has realized an additional amount to the tune of Rs. 11,673/- from the Applicant No. 1 which included both the profiteered amount @ 2.67% of the turnover (base price) and 12% GST on the said profiteered amount. Further, the investigation has revealed that the Respondent ha....
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....ance for the same period. d) Ledger for the period from 01.04.2016 to 31.12.2018. e) Details of the total number of apartments/flats/commercial units/residential units in the project with the total area of each flat. f) Tran-2 Returns. g) Details of Credit Reversal, if any. h) Agreement/Registry between the landowner and the builder for the subject project. i) Present status of the project in terms of sold and unsold units and the ITC benefit passed on to his consumers. j) Details of payment of ITC benefit as claimed by the Respondent. 23. The Respondent has shown agreement with the DGAP Report during the hearing held on 20.09.2019 and in his written submissions dated 06.09.2019. The Respondent has submitted the following documents vide his above submissions:- a) Statement showing project-wise ITC/Cenvat credit availed and Turnover as per the Statutory Return (GST/Service Tax/VAT Returns) for the period from 01.04 2016 to 31 .12.2018. b) Summary of Project wise Turnover and ITC/CENVAT Credit. i. Turnover Summary and CENVAT Summary for 2016-17. ii. Turnover Summary and CENVAT Summar....
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....ow:- ITC benefit Passed under Project "Paradise" Sector-62 Period Total ITC Availed ITC passed in March-2019 ITC Passed in August-2019 TOTAL ITC Passed to Homebuyers July-17 to Mar-2018 1,03,59,470 - Apr-18 to Dec-18 1,13,53,723 - Jan to Mar-19 33,07,641 - Credit Passed to Residential Unit Homebuyers 80,47,677 1,12,38,974 1,92,86,651 Credit Passed to Commercial Unit Homebuyers 1,35,106 24,66,051 26,01,157 TOTAL 2,50,20,834 81,82,783 1,37,05,024 2,18,87,807 28. Taking into account the above submissions of the Respondent, he was directed to submit the evidence showing that ITC benefit had actually been passed on by him to all the buyers. Out of a total of 763 buyers where ITC benefit was required to be pass on, the Respondent vide his submissions dated 05.11.2019 and 25.11 2019 had submitted the list of home buyers along with credit notes, Ledgers, and undertakings/ acknowledgments in respect of 84 (Eighty Four) buyers, on a sample basis, showing the amount of ITC benefit which the Respondent had claimed to have p....
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....umar 9811622328 T3-108 28,287 31,442 -3,155 30. Aalok Jauhari 9711672396 T1-1004 28,287 31,442 -3,155 31. Chandra Prakash Chabra 9999334376 T1-1008 28,287 31,442 -3,155 32. Sunita Bansal 9717252224 T2-504 28,287 31,442 -3,155 33. Sanjay Mahabaleshwar Nuli 9313089944 T3-1204 28,287 31,442 -3,155 34. Meenakshi Manocha 9810338745 T5-1404 28,287 31,442 -3,155 35. Sarita 991141196 33 44,675 48,553 -3,878 36. Puneet Anand 9899787803 14-B/3 28,287 31,442 -3,155 37. Sanu Mittal 9711954457 5M/84 25,282 28,043 -2,761 38. Arun Salhotra 8860404433 5K-91 28,287 31,442 -3,155 39. Manju Aggarwal 9818180103 A-48 28,287 31,442 -3,155 40. Avadesh Prasad 9999236100 6 25,282 28,043 -2,761 41. Anju Devi 8470987749 B-37 13,585 15,041 -1,456 42. Aman Garg 9810007446 2330 28,287 31,442 -3,155 43. Disha Garg 8826828268 T5-204 28,287 31,442 -3,155 44. Vikash Kumar 7042521920 TS-205 25,282 ....
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....11287841 T2-908 28,287 31,442 -3,155 76. Deepak Sikhwal 9891231534 T2-704 28,287 31,442 -3,155 77. Ashima Hans 9811634752 T2-606 25,282 28,043 -2,761 78. Kiran Kumar 9810787670 T1-703 28,287 31,442 -3,155 79. Santosh Kumari 9416834464 T-1005 25,282 28,043 -2,761 80. Rajni Bansal 9899076126 T6-808 13,585 15,041 -1,456 81. Rahul 9416895566 T6-901 13,585 15,041 -1,456 82. Sanjiv Kumar 9896148558 T6-206 13,585 15,041 -1,456 83. Shailendra Kumar Tewari 9654187106 T2-901 25,282 28,043 -2,761 84. Vivek Agarrwal 9811600215 T2-301 25,282 28,043 -2,761 Further, he also submitted Ledgers and Credit Notes in respect of all the home buyers vide his submissions dated 25.11.2019 to prove his claim. 29. This Authority has carefully considered all the submissions filed by the Applicants, the Respondent, and the other material placed on record. It was found by us that the Applicant No. 1 and 2, vide their complaints dated 09.10.2018 and 16.12.2019 respectively alleged that the Respondent was not ....
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....unt of Rs. 1,95,35,865/- (inclusive of GST as applicable) from all the home buyers other than the Applicant No. 1 and 2. The total amount of profiteering on part of the Respondent worked out to be Rs. 1,95,86,429/- (Rs. 1,95,35,865 + Rs. 25,282/- + Rs. 25,282/-) and the same was tabulated in Annexure- 17, 18 and 19 of the Report of the DGAP dated 19.06.2019. The above computation of the profiteered amount has been admitted to be correct by the Respondent vide his submissions dated 06.09.2019. 31. Further, we observed that the Respondent, vide his submissions dated 06.09.2019, contended that he had already passed on the benefit of Rs. 2,18,87,807/- (Rs. 81,82,783/- in March, 2019 and Rs. 1,37,05,024/- in August, 2019) to his home buyers during the period from 01.07.2017 to 31.08.2019. As evidence, he had submitted a list of all his home buyers mentioning the amount of ITC benefit passed on to each of them, Customer-wise ledgers in respect of the home buyers which mentioned entry/entries indicating 'CGST benefit pass on to Homebuyers" and had also submitted sample acknowledgment letters from 84 out of 763 unit buyers in support of his claim of having pass on the benefit of ITC to ....
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....ach of the home buyers. b) To investigate the issue of passing on the benefit of additional Input Tax Credit in respect of aforesaid three projects of the Respondent in terms of Section 171 (2) of the CGST Act,2017 read with Rule 133 (5) of the CGST Rules, 2017. 35. The DGAP has further stated that the issue of verification of Input Tax Credit benefit claimed to have been passed on to his home buyers by the Respondent has been resolved by matching the list of input tax credit passed on to individual customers with the copies of Ledger Accounts submitted by the Respondent. The DGAP, on verification of the copies of Ledger Accounts, has observed that the Respondent has indeed passed on the ITC benefit of Rs. 1,89,36,651/- to 740 home buyers and Rs. 17,51,743/- to 16 commercial shops. A summary of category-wise input tax credit benefit required to be passed on and the benefit actually passed on by the Respondent till the date of Order i.e. 02.01.2020 by the Respondent, was furnished by the DGAP as given in table-E below Table-E (Amount in Rs.) Sr.No. Category of Customers No. of Units Profiteering Amount Benefit already passed on by the Respondent F....
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.... 26.03.2020. The Respondent was issued a notice on 04.03.2020 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 the course of the hearings, no one appeared for both the parties. Instead, the Respondent has filed written submissions dated 18.06.2020 which have been discussed in subsequent paras. 38. The Respondent has submitted that the incremental tax paid on services should not form part of profiteering. He has further elaborated that during the Pre-GST period, the rate of Service Tax charged on the input services was 15%, the credit of which was available, whereas, during the GST regime, the common GST rate for services has been increased from existing (pre-GST) 15% to 18%, the credit of which was also available in post GST. Therefore, no additional benefit has accrued to him in respect of input services as credit for the same was available in both, the pre and post GST eras, and the only difference was that the tax rate on services had been increased from 15% to 18%. The Respondent has submitted the following illustration to strengthen his contentio....
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....he pre-GST regime but allowed in the GST regime. This additional benefit was required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of Section 171 of the GST Act, 2017. Therefore, the DGAP has stated that the claim of the Respondent that the ITC in respect of services should be excluded from the profiteering amount was not tenable. 42. The clarifications of the DGAP dated 02.07.2020 on the submissions of the Respondent dated 10.06.2020 were forwarded to the Respondent for filing his rejoinder, if any. The Respondent, vide his letter dated 11.08.2020, has stated that he has completed his submissions and requested for the closure of the hearing. Therefore, this Authority had closed the hearing in the matter on 13.08.2020 43. We have carefully considered all the submissions filed by the Applicants, the Respondent, and the other material placed on record and find that Applicant Nos. 1 and Applicant No. 2, vide their complaints dated 09.10.2018 and 16.12.2018 respectively, had alleged that the Respondent was not passing on the benefit of ITC to them on purchase of the flats, which they had purchased in the "Paradise" Project....
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.... by the DGAP based on the Service Tax and GST Returns filed by the Respondent during 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 Respondent and therefore, they can be relied upon while computing the profiteered amount. The Respondent has also not raised any objection against the methodology employed by the DGAP while calculating the above ratios. The above methodology has also been approved by this Authority in all the cases where the benefit of ITC is required to be passed on. Therefore, the above methodology is appropriate, logical, reasonable, and in consonance with the provisions of Section 171 of the CGST Act, 2017. 45. The Respondent has also claimed that he has passed on the benefit of Rs. 2,06,88,394/- to his buyers on account of ITC. He has also submitted copies of the acknowledgments from the buyers in respect of 84 (Approx. 10%) buyers out of 763 total beneficiaries of ITC Benefit vide his submissions dated 05.11.2019 and 25.11.2019 as mentioned in the Para - 28 above. The Respondent further submitted copies of Ledger Accounts and cred....
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.... of the IT as it does not form part of his profit. The ITC available to him by paying GST @18% 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 flat. He cannot put the buyers in 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 the benefit of ITC and hence he cannot deny the above benefit. Moreover, the benefit of ITC is also available to the suppliers of the Respondent from whom he is purchasing services and other inputs, and accordingly, such suppliers are also bound to pass on the benefit of ITC to the Respondent which would result in a reduction of cost of the flats built by the Respondent. It would also be worthwhile to mention that the Respondent is also utilizing the ITC to which he has become entitled on the purchase of the services post GST while d....
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....re-5. In case the above amount is not refunded by the Respondent during the above period it shall be recovered by the concerned Commissioner CGST/CGST and paid to the eligible buyers 49. It is also apparent from the record that the Respondent has passed on ITC benefit of Rs. 2,06,88,394/- during the month of March, 2019 and August, 2019. Therefore, he is also liable to pass on interest @18% on profiteered amount to the flat buyers from the dates from which he has received the additional amount of consideration from them till the passing on of the ITC benefit, as he has used this amount in his business, as per the provisions of Section 171 (1) of the CGST Act, 2017 read with Rule 133 (3) (b) of the above Rules. Accordingly, the DGAP is directed to ensure that the interest is paid to be eligible house buyers and submit report confirming payment of the interest. In case the interest is not paid the same shall be recovered by the concerned CGST/SGST Commissioner and paid to the eligible buyers. 50. 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 P....