TaxTMI 
TaxTMI 
2022 (8) TMI 145
X X X X Extracts X X X X
X X X X Extracts X X X X
....espondent's claim of passing on of Rs. 9,45,78,855/- benefit of GST ITC to his homebuyers/customers by way of reduction in GST rate was correct or not? b. Whether the Respondent's claim that for the customers who had made the bookings prior to implementation of GST, i.e. 01.072012 he had charged only 4.5% GST (i.e., equal to the rate of erstwhile Service Tax) from them and borne the remaining 75% GST himself and he had given 100% reduction in GST rate for new bookings of the flat to attract new customer was correct or not? c. whether the Respondent had passed on the benefit of ITC of GST of Rs. 2,94,078/- to the Applicant No.1 d. Whether the Respondent had given an amount of Rs. 3,41,963/- as the discount in addition to reduction in GST rate of 7.5% to the Applicant No. 1? e. Whether the above amounts claimed to have been passed on by the Respondent are in line with the provisions of Section 171 of the CGST Act? f. after carefully considering above issues, exact amount of profiteering which is to be passed on by the Respondent to every homebuyers/customers? 2. The brief facts of the case are that the Applicant No. 1 had filed an application dated 16.10.2018 befor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ledger for the period 01.07.2017 to 31.12.2018. viii. CENVAT/Input Tax Credit register for the period April, 2016 to December, 2018. ix. Copy of Project report submitted to the RERA. x. list of home buyers in the project "Himalaya Pride". d. The Respondent, vide his letter dated 14.02.2019 submitted that he had passed on the benefit of ITC to his customers including the Applicant No 1. He also submitted a copy of the allotment letter dated 26,09,2018, issued in favour of the Applicant No. 1, executed on a non-judicial stamp paper, wherein it was explicitly mentioned that the Applicant No. 1 had to pay only the basic consideration for the flat which was Rs. 40,96,800/- and the applicable GST would be borne by the Respondent. The Respondent did not claim confidentiality of any details/ information furnished by him, in terms of Rule 130 of the CGST Rules, 2017. e. The DGAP further stated that though the Respondent had mentioned that he had passed on the benefit of ITC to the home-buyers, he failed to provide any documentary evidence of such discounts offered to the individual home-buyers except the allotment letter dated 26.09.2018 issued to the Applicant No. 1, wherein it w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tio of CENVAT/ Input Tax Credit to Turnover (I)= (H/E*100) 1.00% 9.52% g. The DGAP thus stated that from the above table, it was clear that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 1.00% and during the post-GST period (July, 2017 to December, 2018), it was 9.52% which indicated that post-GST, the Respondent had apparently benefited from additional ITC to the tune of 8.52% [9.52% (-) 1.00%] of the turnover. h. The DGAP also observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST on construction service (after one third abatement towards value of land, effective GST rate was 12% on the gross value), vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. Accordingly, the DGAP had examined the profiteering by comparing the applicable tax rate and ITC available to the Respondent for the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.5% and VAT on deemed 20% value addition was payable with the post-GST period (July, 2017 to December, 2018) when the effective GST rate was 12% on the gross value and accordingly, o....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../-) which was the profiteered amounts in respect of the Applicant No. 1. The DGAP has further clarified that the Respondent had supplied construction services in the State of Uttar Pradesh only. The DGAP further stated that the profiteered amount was with respect to 739 home buyers. Whereas the Respondent had booked 778 units till 31.12.2018, 39 buyers had not paid any consideration during the post-GST period from 01.07.2017 to 31.12.2018 (period covered by the investigation). Therefore, if the ITC in respect of these 39 units was considered for calculation of profiteering in respect of 739 units where payments had been received in the post-GST period, the ITC as a percentage of turnover would be distorted and erroneous. Therefore, the benefit of ITC in respect of these 39 units should be calculated when the consideration was received from such units by taking into account the proportionate ITC in respect of such units. k. The DGAP also clarified that since the present investigation covered the period from 01.07.2017 to 31.122018, thus, profiteering, if any, for the period post December, 2018, had not been examined as the exact quantum of ITC that would be available to the Respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....11.2020, 19.11.2020, 20.11.2020, 21.11.2020, 24.11.2020, 01.12.2020, 07.12.2020 and 28.12.2020. The reply of the Respondent submitted during the re-investigation was reproduced below by the DGAP:- i. That the allotment letters in respect of the bookings made in the post GST regime had clearly mentioned that the applicable GST @12% would be borne by the Respondent as a GST discount to the customers and the same could be verified from the demand notes issued to the buyers. Therefore, the Respondent had passed on the ITC benefit of 12% to the buyers by not collecting the GST from them. ii. The Respondent also stated that he had given benefit of ITC of 7.5.% to the buyers who had booked fiats in the pre GST regime and only 4.5 % GST was collected from them. iii. The Respondent informed that he had got the Completion Certificate for three towers on 19.06.2018 and he had reversed the GST ITC of Rs.39,42,012/- for an unsold inventory and the reversal was reflected in the GSTR Returns for the month of June, 2019 and July, 2019. iv. The Respondent also submitted that in the earlier report the DGAP had calculated profiteering on the units which were booked after getting Completion C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the re-investigation the Respondent was asked to submit the information required for investigation. Hence the case had been re-investigated again on the basis of fresh data submitted by the Respondent. The main issues to be looked into were:- I. Whether there was benefit of reduction in rate of tax or ITC on the supply of construction service by the Respondent after implementation of GST w.e.f. 01.07.2017 and if so, II. Whether the Respondent passed on such benefit to the recipients by way of commensurate reduction in price, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. III. Investigate the points raised in I.O. g. The DGAP has further stated that another relevant point in this regard was Para 5 of Schedule-II of the Central Goods and Services Tax Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) which reads as "Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building". Further, clause (b) of Paragraph 5 of Schedule II of the CGST Act, 2017 reads as "(b) construction of a complex, building, civil structure or a part thereof, including a complex or bui....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he flats from the Respondent in the post GST period till 31.12.2018. As such, all the allotment letters and demand notes submitted by the Respondent were required to be scrutinized. Scrutiny of these allotment letters and demand notes, in respect of 189 numbers of buyers revealed that these k documents clearly mentioned that the GST would be borne by the builder and the same was not collected from the buyers. The demand notes of the said buyers clearly showed the deduction of 12% GST as ITC benefit from the demands raised from the buyers. k. Therefore, it was observed that the Respondent's contention that GST had not been charged from the buyers in the post GST period, was correct in respect of 189 numbers of buyers whose allotment letters and demand notes were submitted by the Respondent and in which it was clearly indicated. Accordingly, while computing the profiteering amount, the turnover in respect of those 189 buyers who had booked flats in the post GST period and whose allotment letters and demand notes clearly mentioned that the GST would be borne by the Respondent and not charged to the buyers, was excluded. Further, in order to verify the claim of the Respondent tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tage of the turnover that was available to the Respondent during the pre-GST period (Aprils 2016 to June, 2017) was 1.94 % and during the post-GST period (July, 2017 to 31.12.2018)o it was 8.31% in the project "Himalaya Pride". This clearly confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 6.37% [8.31% (-) 1.94%] of the turnover. n. It was observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate was 12% for flats. Accordingly, on the basis of the figures contained in table- 'A' above, the comparative figures of the ratios of ITCs 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, was tabulated by the DGAP in Table-D below:- Table-D (Amount in Rs.) Sr.No. Particulars 1. Period A July, 2017 to December,2018 2. Output GST rate (%) B 12 3. Ratio of CENVAT credit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....verification of soft copies of demand notes (issued to homebuyers),it appeared that out of 529 buyers (Pre GST bookings), the Respondent had not given any GST ITC benefit to 51 buyers as in respect of 29 buyers, no demand was raised in the post GST period i.e. till 31.12.2018 and for the remaining 22 buyers the Respondent had not given any ITC benefit even though the Respondent had raised demand and received payments from them in the post GST period, Therefore, it was a matter of fact that the Respondent had passed on the ITC benefit of Rs 2,26,26,126/- to 478 (529-(22+29) homebuyers in the pre GST period. However, in order to cross check the claim of the Respondent, e-mails were sent to 300 home buyers picked up randomly. Out of these 51 buyers apart from the Applicants had confirmed the receipt of ITC benefit given by the Respondent which was about 11% of the homebuyers list (pre GST bookings) submitted by the Respondent. The details of confirmation of the receipt of payment received through e-mails were enclosed. A summary of benefit of ITC required to be passed on and the ITC benefit claimed to had been passed on to the Applicant No. 1 and other home buyers, has been furnished ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....commensurate benefit, in respect of 354 Home buyers (Sr. 1 of Table-E) by an amount of Rs. 17,35,430/-. In case of 22 buyers (Sr no. 4 of Table-E) the Respondent had to pass on Rs. 7,95,249/- as in respect of these 22 buyers no benefit had been passed on by the Respondent. Therefore, the Respondent had to pass on the additional amount of Rs. 17,86,004/- (9,90,755+,795,249) to the 146 buyers (124+22). r. The DGAP has further stated that as per the directions of this Authority given vide I.O. No 06/2020 dated 03.01.2020, the DGAP did re-investigation of the case on the basis of data submitted by the Respondent. The main issues to be examined were: I. Whether the Respondent's claim of passing on of Rs. 9,45,78,855/- as benefit of GST ITC to his homebuyers/customers by way of reduction in GST rate was correct? Reply: - The Respondent submitted that during the earlier investigation, he claimed that ITC benefit of Rs. 9,45,78,855/- was already passed on to the buyers, however the same was derived on when Rs. 2,67,63,785/- received or due from homebuyers but not able to allocate unit wise while submitting the data with the DGAP. Now, the books of accounts had been audited by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he pre GST period was not fully correct, however, it was a matter of fact that the Respondent in total had passed on ITC benefit of Rs. 2,26,26,126/- in respect of 478 buyers. Further, in respect of the buyers, who had booked flats in the post GST period, it was observed that the claim of the Respondent that he had given 100% reduction in GST in terms of ITC benefit had merit and the same was verified from the allotment letters as well as demand notes of post GST buyers and further it was confirmed by the buyers on e-mails. III. Whether the Respondent had passed on the benefit of ITC of GST of Rs 2,94,078/- to the Applicant No. 1? Reply:-The Respondent submitted that he had signed a legitimate agreement/allotment letter dated 26.09.2018 with the Applicant No. 1 (post GST buyer) for buying a Flat no. C-4/6 in the project "Himalaya Pride". The cost of the flat shown in the allotment letter was Rs. 40,96,800/- plus GST applicable and the applicable GST would be borne by the Respondent, which would be passed on to the Applicant No. 1 as an ITC discount. The Respondent submitted that he had passed on Rs. 3,44,130/- till 31.12.2018 and the same was also reflecting in the demand lette....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Rs. 17,86,004/- (9,90,755+,795,249) to the 146 (124+22) buyers and the same was explained in Table-E above. s. The DGAP has also submitted that the benefit of additional ITC to the tune of 6.37% of the turnover, has accrued to the Respondent post-GST and the same was required to be passed on by the Respondent to his recipients. Section 171 of the CGST Act, 2017 appeared to had been contravened by the Respondent, in as much as the additional benefit of ITC @ 6.37% of the base price received by the Respondent during the period 01.07.2017 to 31.12.20180 had not been passed on to 146 recipients. On this account, it appeared that the Respondent had realized an additional amount to the tune of Rs. 2,26,76,700/- (including GST). It also appeared that out of 529 buyers (pre GST bookings), the Respondent had passed on the ITC benefit of Rs 2,26,26,126/- to 478 homebuyers as mentioned in above Table-E, which had been verified from all the demand notes submitted by the Respondent and confirmation received on sample basis from the buyers. Therefore, in view of facts stated above, it was also observed that the Respondent was required to return an additional amount of Rs. 17,86,004/-(incl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 3,44,130/- to him as has been claimed by the DGAP in its report dated 30.12.2020. 9. Since, the quorum of the Authority of minimum three Members, as provided under Rule 134 was not available till 23.02.2022, the matter was not decided. With the joining of two new Technical Members in February 2022, the quorum of the Authority was restored from 23.2.2022. The Respondent and the Applicant No. 1 were also granted hearing through video conferencing on 29.03.2022. Sh. Himanshu Gautam, Sh. Manoj Singh, Assistant Commissioner and Sh. Balram Sinha appeared on behalf of the Applicant No. 1, the DGAP and the Respondent respectively. During the course of hearing, the Applicant No. 1 has reiterated his submissions made through e-mail dated 10.02.2021. The Respondent has also made his arguments based on his written submissions. Further, the Applicant No. I was also directed to file his final consolidated written submissions. 10. The Applicant No. 1 has filed his submissions vide e-mail dated 30.03.2022 vide which he reiterated his earlier submissions filed vide e-mail dated 10.02.2021 and has inter-alia stated that the Respondent should be asked for the transaction details vide which he h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xtent of 8.52% of the taxable turnover which he had not passed on to his homebuyers/customers and he had thus profiteered an amount of Rs. 8,52,31,342/- in violation of the provisions of Section 171 of the CGST Act, 2017. However, due to the objections raised by the Respondent on the above Report of the DGAP as well as the discrepancies found in the Report, the DGAP was directed to re-investigate the above complaint under Rule 133 (4) of the above Rules vide Internal Order No. 06/2020 dated 03.01.2020. c. The DGAP has re-investigated the matter as per the directions given and vide his Report dated 30.12,2020 and as per calculations made In Tables IC, 'D 'and 'E' above found that:- i. The Respondent has booked a total of 766 units in both the pre GST period and the post GST period uptill 31.12.20181n his project. ii. Out of the total units booked, 718 were sold before receipt of Occupancy Certificate (Of) and 48 were sold after receipt of OC. iii. Out of these 718 homebuyers/customers, 189 homebuyers/customers were excluded from purview of profiteering as the benefit of ITC was passed on to these 189 homebuyers/customers by way of waiving the entire GST @12%.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imself, is as per such records passed on by way of, calculating the sum total of the taxable value plus GST (c)12% ad valorem on the taxable value, and then decreasing the demand from the homebuyers/customers by an amount equal to the GST calculated, so as to pass on the benefit of ITC. Copy of Allotment Letter dated 26.09.2018 and Demand Letter dated 03.11.2020 to Shri Rahul Gautam & Mrs. Prabha Singh are as hereunder: ix. For the purpose of calculation of amount profiteered, demands raised from the home buyers who have booked their units post-GST has not been considered. This is because, the benefit of ITC was appropriately passed on by the Respondent, as verified by the DGAP, to such 189 homebuyers/customers by deduction of amounts raised in demand notices. Thus, the profiteered amount came to Rs. 2,26,76,700/- with respect to 500 homebuyers/customers i.e. those who have booked their units prior to 1.07.2017 (excluding those from whom no demand was raised/consideration received from 1.07.2017 to 31.12.2018). x. The Applicant No. 1 has booked his flat in the post-GST period. It has been verified by the DGAP, that benefit on account of additional ITC has been passed on to al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en passed on to 500 homebuyers/customers who had booked Units in the pre-GST period, the DGAP has sent e-mails to 300 homebuyers/customers picked up randomly to confirm whether the Respondent has passed on the benefit of ITC to them or not. Out of these 300 homebuyers/customers, only 51 confirmed that they had received the benefit of ITC from the Respondent. Hence, we hold that, with respect to such category of homebuyers/customers i.e, those who have booked their units prior to 01.07.2017 (excluding those from whom no demand was raised/ consideration received from 1.07.2017 to 31.12.2018), the DGAP verification is inconclusive and it cannot be concluded that all such homebuyers/customers have got the benefit of ITC that was required to be passed on by the Respondent. 18. In view of the above discussions, the Authority finds that the Respondent has profiteered by an amount of Rs. 2,26,76,700/- during the period of investigation i.e. 01.07.2017 to 31.12.2018. The above amount that has been profiteered by the Respondent from his home buyers shall be refunded by him, along with interest 018% thereon, from the date when the above amount was profiteered by him till the date of such pay....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts that the Respondent has denied benefit of ITC to the homebuyers/customers of the Units being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, w.e.f. 01.01.202 and hence, was not in force during the period of investigation i.e. from 01.07.2017 to 31.12.2018, when the Respondent had committed the above violation and hence, the penalty prescribed under Section 171 (34) cannot be imposed on the Respondent retrospectively. 25. The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding compliance of this Order to this Authority and the DGAP within a period of 4 months from the date of receipt of this order. 26. Further, the Hon'ble Supreme Court, vide its Order dated 23.03.2020 in Suo Moto Writ Petition (C) no. 3/2020, while taking suo-moto cognizance of the situation arising on account of Covid-19 pandemic, has extended the period of limitation prescribed under general law of limitation or any other special laws (both ....