TaxTMI 
TaxTMI 
2022 (8) TMI 94
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....n the benefit of ITC to his buyers as has been claimed through documentary evidence furnished by him during the course of the present proceedings? (ii) In case the Respondent has passed on the ITC benefit then what is the amount of the benefit passed on? (iii) What is the amount of ITC the benefit of which is required to be passed on by the Respondent to his recipients after correctly considering the figures of Cenvat credit? (iv) What is the amount of turnover to be taken into account during the period from 01.07.2017 to 31.12.2018? (v) What is the profiteered amount arid entitlement of benefit of ITC to be passed on to each eligible home-buyer including the Applicant No. 1? The brief facts of the present case are that an application dated 09.08.2018 was fi led before the Maharashtra State Screening Committee by the Applicant No. 1 under Rule 128 of the CGST Rules 2017 alleging profiteering by the Respondent in respect of purchase of a flat, T4-1004 OAK, in Tower-4 of the Respondent's project "Runwal Forests" near Mangatram Petrol Pump, LBS Marg, Kanjurmarg (W), Mumbai-400078. The Applicant No. 1 had alleged that the Respondent had not passed on the benefit of input t....
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....he matter back under the provisions of Rule 133 (4) of the CGST Rules 2017, vide Interim Order No. 01/2020 dated 01.01.2020 to the DGAP directing him to reinvestigate on the issues mentioned in paragraph-1. 8. Accordingly the DGAP had submitted his instant Report dated 31.08.2020 to this Authority, wherein, the DGAP, has inter alia, stated that:- (I) On receipt of the aforesaid order from this Authority on 03.01.2020, the information/documents submitted by the Respondent were re-examined and cross-verified with the Report dated 26.06.2019 submitted by him before this Authority. He further stated that at the time of submission of above mentioned Investigation Report dated 26.06.2019, the Respondent had submitted the requisite information and data for the period covered under investigation. Since no direction to extend the period of investigation was given, hence the same set of data was sufficient for current re-investigation, The Respondent's submissions made before this Authority during hearings had been duly incorporated while examining the points raised by this Authority in its aforesaid 1.0. dated 01.01.2020. The DGAP also stated that all the issues raised by this Authori....
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.... not appropriate because he had overlooked the fact that in case of most flats booked after 01.07.2017, the original agreement value had already been reduced by way of discount and GST was charged on reduced agreement value. The Respondent claimed that for units booked post 01.07.2017 across both categories of units, upfront discounts up to 5.8% on the original agreement value have been passed at the time of sale, by way of reduction in the original agreement value and GST was charged on the reduced agreement value only. The Respondent also averred that he had already passed on discount to his customers who had booked units post-GST totalling Rs. 7,48,06,433/- (vide submission dated 08.08.2019) and no further discount was required to be passed on to these customers on progress billings, In case of most of the flats sold after 01.07.2017, the original agreement value has already been reduced by way of discount and GST was demanded on reduced agreement value. The Respondent had submitted copies of cost sheets of flats sold after 01.07.2017 during the course of hearing as documentary evidence to establish his point. (ii) that the documents submitted by the Respondent have been r....
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....pfront discount up to 5.8% on the original agreement value was passed on at the time of booking itself by way of reduction in the value to reduce the impact of increase in cost owing to increase in the rate of tax from 5.5% (4.5% Service Tax + 1% MVAT) in the pre-GST regime to 12% on account of introduction of GST. Accordingly, the original agreement values have already been reduced by giving discount and GST on applicable rate was demanded from the customers on the reduced agreement value. The increase in tax rate from 5.5% to 12% resulted in higher cost incidence for customers. The DGAP has submitted that the Respondent contended that the incremental tax burden was absorbed by him by offering discount up to 5.8% in the beginning itself as anti-profiteering discount subject to the condition that after this discount was provided there will be no further liability to provide any discount under section 171 of the CGST Act 2017. The additional benefit of Input Tax Credit arising due to implementation of GST could only be ascertained and quantified at the end of completion of construction as neither sales nor purchases were evenly spread. Also, milestones of billing to existing cus....
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....x incidence upon the recipients was 5.5% (4.5% Service Tax +1% MVAT) in pre-GST period, which increased to 12% in post-GST era, Further, the Respondent contended that as the exact quantum of ITC benefit that would accrue to him over the period was not available, he had chosen to absorb the incremental tax impact by passing upfront discount to the tune of approximate incremental tax so that there is no cost escalation on account of increased tax rates for home-buyers. The DGAP has stated that though, the Respondent's reasoning behind offering such approximate discount to the new home-buyers in absence of knowledge of exact quantum of ITC appeared to be logical, it was pertinent to mention that the quantum of benefits so offered by the Respondent to the home-buyers has varied. It is 6.5% (12% - 5.5%) for the normal home-buyers, and in case of affordable houses, wherein effective GST rate was reduced w.e.f. 25.01.2018 from 12% to 8%, the discount offered varies in the range 2.5-3% (8%- 5.5%), for units hooked after rate reduction. (vi) that the agreement value of flats sold post implementation of GST, has been looked into to find out if there was an actual decrease in the agre....
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....perusal of the home-buyer details, details of the demands raised from home-buyers and details of benefits passed on by the Respondent are mentioned in Table B as: Table B Home Buyer Data Affordable housing Other than affordable Total Sales of Units Sold Pre-GST 312 500 812 Post-GST with benefit of ITC 177 161 338 Sold Post-GST without benefit of ITC 54 33 87 Total Sold 543 694 1237 Unsold 97 993 1,090 Total 640 1,687 2,327 Demands raised post GST PRE-GST Sale Demand raised without ITC benefit 172 136 308 Post GST Sale Demand without benefit of ITC 54 33 87 Post GST Sale Demand with benefit of ITC 177 161 338 Total 403 330 733 The DGAP upon perusal of the details as mentioned in Table B above, has submitted that it was clear that the Respondent has raised demands from a total of 733 home-buyers (403 in Affordable Category and 3.30 in Other than Affordable Category). Out of the total home-buyers, ITC benefits have been extended to a total of 338 home-buyers (177 in Affordable Category and 161 in Other than Affordable Category) who had booked their units post-GST implementatio....
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....to June, 2017 (Post-GST) July, 2017 to December, 2018 1. Credit of Service Tax Paid on Input Services (A) 120,686,138 - 2. Input Tax Credit of VAT Paid on inputs (B) - - 3. Total CENVAT/VAT/Input Tax Credit Available (C)=(A+B) 120,686,138 - 4. Input Tax Credit of GST Availed (D) - 242,956,020 5. Total Turnover from Residential Area (E) (from Home-Buyers list for live customers) 3,170,151,245 3,875,827,122 6. Total Saleable Area in Sq. Ft. (F) 1,613,379 1,613,379 7. Sold Area Relevant to Turnover in sq.ft. (G) 523,264 433,884 8. ITC Proportionate to Sold Area (H)=(C) or (D)*G/F 39,141,894 65,337,859 9. Ratio of CENVAT/VAT/Input Tax Credit to Turnover (I=H/E*100) 1.23% 1.69% (ii) that from the above Table- 'C', it transpires that the input tax credit as a percentage of the turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 1.23% and during the post-GST period (July, 2017 to December. 2018), it was 1.69%. This indicates that post-GST, the Respondent has apparently benefited from additional input tax credit to the tune of 0.46% [1.69%(-) 1.23%] of the turnover. (iii) t....
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....s of input tax credits to the Respondent's turnovers in the pre-GST and post-GST periods, the recalibrated basic price (on account of benefit of additional input tax credit) as well as the excess collection (profiteering) during the post-GST period, are tabulated in table-'D' below: Table-D (Amount in Rs.) S.No. Particulars Pre-GST Post-GST 1. Period A April, 2016 to June, 2017 01.07.2017 to 31.12.2018 01.072017 to 24.01.2018 25.01.2018 to 31.12.2018 2. Output tax rate (%) B 5.50% 12.00% 12.00% 8.00% 3. Ratio of CENVAT/VAT/GST Input Tax Credit to Turnover as per Table - B above (%) C 1.23% 1.69% 1.69% 1.69% 4. Increase in input tax credit availed post-GST (%) D - 0.46% 0.46% 0.46% 5. Analysis of Increase in input tax credit: 6. Total Basic Demand during July, 2017 to December, 2018* E 494,851,850 94,323,308 380,558,465 7. GST @ 12% or 8% F=E*12% 59,382,222 11,318,797 30,444,677 8. Total Demand G=E+F 554,234,072 105,642,105 411,003,142 9. Recalibrated Basic Price H=E*(1-D) or 99.54% of E 492,575,531 93,889,421 378,807,896 10. GST@12% or 8....
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....oked post-GST but with no benefit passed on. Accordingly, for the period 01.07.2017 to 31.12.2018, gross turnover of the Respondent was Rs. 3,71,38,60,019/- (exclusive of benefits of Rs. 16,19,67,103/- passed to 338 home-buyers) from 733 home-buyers. For the purpose of calculation of profiteering, demands raised from home-buyers who booked their units prior to GST implementation and 87 units booked post-GST but with no benefit passed on have been considered. For Affordable Housing category it is Rs. 47,48,81,773/- from 226 home-buyers, and in the category other than Affordable, it is Rs. 49,48,51,850/- from 169 home-buyers, totalling Rs. 96,97,33,623/- from across both the categories. The Respondent has booked a total of 1237 units, however the computation of profiteering is only for the 395 home-buyers across the two categories, excluding those to whom benefit has already been passed on. (e) In reply to the query as mentioned at pars 1 (v) supra, the DGAP has stated that total profiteering for the Respondent is Rs. 49,26,045/-, inclusive of the amount of profiteering for Applicant No 1. On this account, the Respondent has realized an excess amount to the tune of Rs. 3,76....
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....um of benefit being offered on account of GST as upfront discount in the agreement value. Further all the cost sheets mention specifically that "post absorption of the incremental tax impact on the GST by the developer, the developer would not be required to pass any additional benefit under the Anti-Profiteering provision under section 171 of the CGST Act 2017. Cost sheets where discounts have been offered to customers have already been submitted to this Authority for its perusal through his submission dated 17th Sept. 2019. (ii) that the authenticity of these Cost sheets has been corroborated through response received from customers by the DGAP confirming that the Cost sheets and the discounts provided were correct. (iii) that the DGAP has further held that the agreement values of fiats sold post GST were actually lower compared to the prices in the pre-GST period which means that the customers in the post GST period have benefited from the GST discount provided through the cost sheets. (iv) that the DGAP in his report has held that he (the Respondent) had violated the provisions of Sec. 171 (1) of the CGST Act 2017 and profiteered to the tune of 0.46% or Rs. 49,26,044/-. H....
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.... DGAP has referred to the Table-B and subsequent paras of his report dated 31.08.2020 and submitted that he has clearly mentioned that 87 home buyers out of 733 home buyers who have booked units post-GST implementation, no benefit of ITC by way of upfront discount has been given. The DGAP has also submitted that in this connection, Table-C of the said Report may also be referred where the ratios of input tax credits to the turnovers, during the pre GST and post GST periods are furnished, wherein it is noted that benefit of only 0.46% has accrued to the Respondent. The upfront discounts offered to the new home buyers have been taken into account in the report dated 31.08.2020. The profiteering of additional ITC benefit of 0.46% to the Respondent has been worked out in the above Report in respect of only those home buyers who were not offered upfront discounts by the Respondent. Further, the DGAP has referred to the Point No, iv of Para 8 of the Report dated 31.08.2020 for the amount of turnover taken and Point No. v of Para of the said Report for the profiteered amount and entitlement of benefit of ITC to be passed on to each eligible home buyers including the Applicant No. 1. T....
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....n full compliance of the provisions made under Section 171 of the CGST Act 2017. He has further stated that these discounts were calculated @ 2% to 2.5% depending on the discount rate applicable at the time when the invoices were raised. lie also submitted that he had already slated in his earlier submissions that the rate of discount fluctuated depending on the cumulative ITC availed and cumulative demands raised till the end of every month. As per his observation, the discount rate has always reduced due to IT reversals on receipt of Occupancy Certificate. Further he stated that in any case the rate of discount calculated by him, was higher than the rate of 0.46% arrived by DGAP. (iv). The Respondent has submitted that he had approached the balance 224 customers for such undertakings to further adduce the fact that discount benefits were passed on to them under ec.171 of the CGST Act 2017, that would help him further corroborate the fact that ITC discounts had already been given. He further stated that these undertakings were generally given by customers at the time of possession and he expected these 224 customers to give him the undertakings over the next two months. 15. On ....
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....20 and to submit his Report alongwith documentary evidences to establish that the benefit of the ITC has been passed on by the Respondent to his homebuyers. (ii) submit clarifications on the Applicant No. 1's submissions dated 25.01.2021 under Rule 133 (2A) of the CGST Rules 2017. 18. Accordingly, the DGAP vide his Report dated 25.02.2021 submitted his clarifications as called for by this Authority vide its said Order dated 08.02,2021 whereby: (1) the DGAP, in reply to para 17 (i) supra, has submitted that the issue has already been verified and replied at para no, 8 of his Report dated 31.08.2020. (ii) the DGAP, in reply to para 17 (ii) supra, has inter alia submitted that the issues were not related to investigation and pertained to the order of this Authority. He further submitted that the Applicant No. 1 has placed same facts and informed this Authority that the undertaking with respect to receipt of discount of GST was taken under duress by the Respondent. He also stated that the Applicant No. 1 has also made some other observations which were not related to investigation. 19. Since, the quorum of the Authority of minimum three Members, as provided under Rule 134 w....
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....nd in the Report, the DGAP was directed to re-investigate the above complaint under Rule 133 (4) of the above Rules vide Interim Order No. 01/2020 dated 01.01.2020. (ii) The DGAP has re-investigated the matter as per the directions given by this Authority and vide his Report dated 31.08.2020 and as per calculations made in Tables 'B', 'C 'and 'D' above has found that a. The Respondent in his Project "Runwal Forests" has 11 Towers comprising Tower-1 to Tower 3 for Affordable Housing (AH) and Tower 4 to Tower 11 for Other than Affordable Housing (OAH) which have 640 units and 1687 units respectively. b. The Respondent has booked a total of 1237 units in both the pre GST period and the post GST period uptil 31.12.2018, c. Out of total units in both the categories. 812 (312 AH + 500 OAH) units were booked in pre-GST period i.e. prior to 1.07.2017 and 425 (231 AH + 194 OAH) units have been booked in the post GST period by the Respondent as detailed in "Table-B" above. d. The Respondent had raised demands from a total of 733 home-buyers (403 AH and 330 OAH) in the post-GST period. e. Out of such 733 homebuyers, 308 (172 AH and 136 OAH) had booked their units/homes pri....
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....eir homes/units after 1.07.2017 and on whom demands have been raised during the period covered by this investigation/Order i.e. from 1.07.2017 to 31.12.2018. in. No benefit of ITC has been given to 87 home-buyers (54 AH and 33 OAH) who have booked homes/units on or after 1.07.2017 i.e. post-GST implementation and on whom demands have been raised during the period covered by this investigation/Order i.e. from 1.07.2017 to 31.12.2018. n. No benefit of ITC has been given to the 308 home-buyers (172 AH and 136 0A11) who had booked their units before 1.07.2017 i.e. prior to GST implementation, and demands have been raised post-GST, and on whom demands have been raised during the period covered by this investigation/Order i.e. from 1.07.2017 to 31.12.2018. o. The ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was 01.23% and during the post-GST period this ratio was 1.69%, as per the Table-C mentioned above and therefore, the Respondent has benefited from the additional ITC to the tune of 0.46% (1.69% - 1.23%) i.e. Rs, 49,26,045/- of the total turnover which he was required to pass on to the 395 (308 + 87) eligible flat buye....
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....stomers have acknowledged receiving the discount and in respect of balance 395 customers, ITC benefit discounts were passed through credit notes to 381 customers and 14 customers have cancelled their booking and thus are not entitled to ITC benefits. He further claimed that he had profiteered by Rs. 49,26,045/, However, if the ITC discounts passed on to customers through credit notes were taken into account (amounting to Rs. 2,45,79,594/-) then he would have absorbed excess 1TC discount of Rs. 1,96,53,549. This would mean that there was no profiteering by him and he had actually passed discounts in excess of the rate at which ITC benefit was required to be passed on to customers as per the DGAP's Report. Whereas the DGAP vide his clarification dated 29.11.2020 for the submission dated 07.10.2020 of the Respondent, has submitted that it has clearly mentioned in the Report dated 31.08.2020 that in the case of 87 home buyers out of 733 home buyers who have booked units post-GST implementation, no benefit of ITC by way of upfront discount has been given. The Respondent could provide only some Cost Sheets in respect of individual home buyers to corroborate his submission of having....
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....ch includes both the profiteered amount @ 0.46% of the taxable amount (base price) and GST @ 8% / 12% on the said profiteered amount from the 394 flat buyers other than the Applicant No. 1. The Authority determines that, the Respondent has profiteered an amount of Rs. 49,26,054/- inclusive of GST @ 8% / 12% as calculated in the aforesaid Report dated 31.08.2020 for the stated period. Hence, the Authority holds that the Respondent is required to pass on the benefit of ITC along with the interest @ 18% per annum from the dates from which the above amount was collected by him from them till the payment is made as prescribed under Rule 133 (3)(b) of the CGST Rules, 2017, within a period of 3 months from the date of this Order as per the details mentioned in Annexure-A to this Order. Accordingly, this Authority under Rule 133 (1) (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 Project commensurate with the benefit of ITC received by him as has been detailed above. 23. The present investigation has been conducted up to 31.12.2018 only. However, the Respondent has not obtained the Completion Certifi....