TaxTMI 
TaxTMI 
2022 (8) TMI 529
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....ondent. The Applicant No. 1 alleged that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price of the Flat No. B-1601 purchased from the Respondent in the Respondent's project "Sanghvi Solitaire". situated at Borivali, Maharashtra in terms of Section 171 of the CGST Act, 2017. 2. The DGAP in his Investigation Report dated 23.02.2021, has inter-alia, submitted as under:- 2.1 The aforesaid application was examined by the Standing Committee on Anti-profiteering, in his meeting held on 21.10.2020. the minutes of which were received in the DGAP on 11.11.2020, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly. investigation was initiated to collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. 1 in respect of construction service supplied by the Respondent. 2.2 On receipt of the reference from the Standing Committee on Anti-profiteering, a Nonce was issued to the Respondent on 07.12.2020. calling upon the Respondent to reply as to whether he admit that the benefit of ITC had not been passed o....
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....nt has in fact promoted the GST Law by stating that there would he removal of cascading effect in the tax structure which was present before introduction of GST, and therefore the customers would he benefited due to which the adequate safeguard provision were introduced to cover any benefit that accrues due to change in tax legislation to the assessee should be passed on the customers. e. The Complainant who bought the flat in June, 2018 which was much after the introduction of GST and being completely aware, while finalizing the price of the said flat that the adequate tax benefit, if any, had been already considered in the price that was offered to him and after considering the same he agreed to buy the flat. f. Nothing stopped him at the time of buying the flat or entering into the Agreement in June, 2018 to ask further reliefs, if any, which was being sought by the frivolous complaint. filed with an intention to build pressure. g. The complainant was well aware that price of the flat was decided after considering the ITC benefit if any available to the builder and which he agreed while signing the Agreement and therefore, there was no question of any ....
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....to increase in construction cost 80% of all Inputs & 100% of Cement should be from GST registered dealer wherein all G5'l- adds up to construction cost wherein builder was not left with a choice to purchase even small inputs from unregistered dealers. o. M/s Sanghvi Premises Pvt. Ltd was in business of Land Development which had four promoters and each promoter had his respective projects in the company wherein separate accounts was prepared from each promoter's group. Till April 2019 all the promoters had single GST number 27AAAC10598D1ZM (herein after referred to as "'Old number"). p. Prom April 2019 three new numbers were taken amongst which one 27AAACL0598D3ZK (herein after referred to as "new number") were of Mr. Rakesh Sanghvi (Promoter) which had Solitaire project in it. 2.6 Vide the aforementioned letters, the Respondent submitted the following document/information: (a) Brief Profile of the Respondent. (b) Copies or GSTR-1 returns for the period July, 2017 to August, 2020 for old GST number. (c) Copies of GSTR-3B returns for the period 2017 to August, 2020 for old or number. (d) GSTR-9 for old GST number for FY 2017-1....
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.... 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 building intended for sale to a buyer, wholly or partly, except where the entire consideration had been received after issuance of completion certificate, where required, by the competent authority or after his first occupation. whichever was earlier". Thus, the ITC pertaining to the residential units which was under construction but not sold was provisional ITC which might be required to be reversed by the Respondent, if such units remain unsold at the time of issue of the completion certificate. in terms of Section 17(2) & Section 17(3) of the CGST Act, 2017. Which read as under: Section 17 (2) "Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said....
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....ring, it was observed that prior to 01.07.2017 i.e., before the GST was introduced, the Respondent was eligible to avail credit of Service Fax paid or the input services (CENVAT credit of Central Excise duty was not available) in respect of the flats for the project "Sanghvi Solitaire" sold by them. Moreover, the Respondent had not claimed the benefit al credit of VAT paid on the inputs. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. From the data submitted by the Respondent covering the period April. 2016 to 31.03.2019, the details of the ITC availed by them, bib turnover from the project "Sanghvi Solitaire" and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017 and post-GST (July, 2017 to 31.03.2019) periods, was Furnished in table-A below. Table -A Sr.No. Particulars Total (Pre-GST) April, 2016 to June 2017 Turnover (July, 2017 to March, 2019) 1. CENVAT of Service Tax Paid on Input Services used for flats (A) 27,73,302 - 2. Input Tax Credit of VAT Paid on purchase of Inputs (B) - - 3. Total CENVAT/Input Tax Credit Available (C) (A+B) 27,73,302 - 4. ....
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.... Increase in ITC availed post-GST (%) D=6.86% less 1.00% 5.86% 5. Analysis of Increase in input tax credit: 6. Base Price raised during July, 2017 to March, 2019 (Rs.) E 8,24,96,944 7. GST raised over Base Price (Rs.) F=E*B 98,99,633 8. Total Demand raised G=E+F 9,23,96,577 9. Recalibrated Base Price H=E*(1-D) or 94.14% of E 7,76,62,623 10. GST@12% I=H*B 93,19,515 11. Commensurate demand Price J=H-I 8,69,82,138 12. Excess Collection of Demand or Profiteering Amount K=G-J 54,14,439 2.17 From table.-'B' above, it was clear that the additional ITC of 5.86% of the turnover should had resulted its the commensurate reduction in the base price as well as cum-tax price, therefore, in terms of Section 171 of the CGST Act. 2017, the benefit of such additional lit was required to be passed on to the recipients. 2.18 The DGAP in his report had mentioned that it was evident from the above calculation explained in Table-I3 on the basis of the aforesaid CENVAT/input tax credit availability pre and post-GST and the details of demand raised by the Respondent from the Applicant ....
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....efit of input Tax Credit. Thus, the Respondent was not eligible to avail the ITC w.e.f 01.04.2019 and Section 171 of CGST Act, 2017 was not attracted. 2.22 In view of the aforementioned findings, it appears that Section 171(1) of the CGST Act, 2017. requiring that "any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices", had been contravened in the present case. 3. The above Investigation Report was received by this Authority from the DGAP on 23.02.2021 and was considered in its sitting held on 04.03.2021 and Notice dated 10.03.2021 was issued to the Respondent and the Applicant No. 1 directing them to explain why the Report dated 23.02.2021 furnished by the DGAP should not be accepted and liability of the Respondent should not be fixed for violating the provisions of Section 171 of the CGST Act. 2017. 4. In response to the above said Notice the Respondent had filed his submissions dated 22.03.2021, inter-alia, stating as under:- 4.1 He didn't have any incremental benefit of ITC, rather had diminishing benefit of ITC, based on qualitative factors which had conve....
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....tax benefit if any by way of ITC was already passed on by way of appropriate reduction in the price that was offered. 4.8 Clause 8 on Pg. 7 of Sale Agreement dated 18.06.2018 clearly specifies that the Sale Price was exclusive of GST and other Tax and all such amount shall be entirely borne and paid by the Purchasers. 4.9 The same was also confirmed in Clause 12 on pg. 8 of the sale Agreement which again reiterates that the Sale price was exclusive of all tax including GST and all such tax applicable on the sale price shall be borne and paid by the Purchaser alone. 4.10 In Clause 13 on pg 8 of the Sale Agreement which reads as under- "The Purchaser was aware that as per present statue, GST was levied/applicable on the sale price payable" "The Purchaser's hereby undertakes to pay the amount of GST along with each instalments from the effective date and further shall not dispute or object to payments of such Statutory dues". "The Promoter shall not be hound to accept the payments of any instalments unless the same was paid along with the amount of GST Applicable" "Provided further that if on account of change/Amendments in the present stat....
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..... Input Tax Credit of VAT Paid on Purchase of Inputs (B) - - 3. Total CENVAT/Input Tax Credit Available (C) (A+B) 27,73,302 - 4. Input Tax Credit of GST Availed (D) - 49,25,599 Mentioned in Details below 5. Turnover for Flats as per Home Buyers List (E) 12,28,57,236 8,24,96,944 6. Total Saleable Area (in SQF) (F) 26,288 26,288 Mentioned in Details below 7. Total Sold Area (in SQF) relevant to turnover (G) 10,660 13,088 8. Relevant ITC [(H)=(C)*(G)/(F)] & [(H)=(D)*(G)/(F)] 11,24,596.75 24,52,307 Consequently Charges Ratio of ITC Post-GST [(I)=(H)/(E)] 1.00% 6.86% Table B Sr.No. Particulars 1. Period A July, 2017 to March, 2019 Explanation for Charges 2. Output GST rate (%) B 12 3. Ratio of CENVAT Credit/ITC to Total Turnover as per table -'B' above (%) C 2.97%/0.92% Consequently Charges 4. Increase in ITC availed post-GST (%) D=2.97% less 0.92% 2.05% Consequently Charges 5. Analysis of Increase in input tax credit: 6. Base Price raised duri....
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....21. The said amount would, however, increase the ITC amount and would be detrimental to him, in order to arrive at proper calculation. he had included the said amount in above reconciliation. 4.17 relation to amount mentioned in SI. No. 5 above in 'Table No C, the DGAP had erroneously missed to include GST credit of Rs. 53,198 in his calculation wherein the said credit belonged till 31st March 2019, however was missed by him to he claimed till 31st march 2019 return which was claimed by him in future returns. The said amount 'would, however, increase the ITC amount and would be detrimental to him, in order to arrive at proper calculation. he had included the said amount in above reconciliation. 4.18 In relation to Serial No. 6 above in Table C, the DGAP had erred in not considering the said reversal of Rs.53,82,926 on account of change in regime where whilst had been reversed was the GST credit taken earlier till March 2019. The said reversal belongs to the credit taken till 31st March 2019 where a calculation was suggested by CBIC to reverse so much of credit as on 31st March 2019. since his accounts finalization took time, he had reversed the said amount later on after 3....
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....ther factors which had been completely ignored by the DGAP for which he re-iterated his submission dated 15 January 2021 before DGAP that various other factors due to which cost had shoot up due to introduction of GST such as Steel, Bricks. Paint & other Electrical goods used for finishing. and since in most of the goods GST rate was higher. he had to block his good amount of working capital which ultimately leads to increased borrowing cost. Further from April, 2019 i.e. Reduced rate without ITC, there was various condition embossed on builder which leads to increase in construction cost i.e. 80% of all Inputs & 100% of Cement should be from GST registered dealer wherein all GST adds up to construction cost wherein builder was not left with from unregistered dealers. At this stage he was unable to quantify how much negative impact he had faced after Introduction or GST wherein his project "Sanghvi Solitaire" had a huge loss of approx. Rs. 2 Crores wherein construction budgets were completely shaken by Introduction of GST, which could be appreciated front this that till 31 March 2018 he was offering profits in the said projects but tiller introduction of GST huge losses....
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....DGAP in its report has inter-alia stated as under:- 7.1 DGAP Report was erroneous in nature wherein ITC figure as mentioned at SI. No. 4 or table A mentioned in para 16 of Report and Total Saleable area (in SQF) as mentioned at SI. No. 6 of Table A mentioned in para 16 of Report was wrongly arrived. The above contention was wrong as figures of ITC had been taken from the figures reconciled with GST returns as submitted by the Respondent. The total saleable Area had been taken from RERA Registrations and sold area from Horne Buyers list as submitted by the Respondent. 7.2 The modified Table A and B submitted by the Respondent as per his own understanding. The actual table-A and B of the DGAP's report dated 23.02.2021 was reproduced as under: Sr.No. Particulars Total (Pre-GST) April, 2016 to June 2017 Turnover (July, 2017 to March, 2019) 1. CENVAT of Service Tax Paid on Input Services used for flats (A) 27,73,302 - 2. Input Tax Credit of VAT Paid on purchase of Inputs (B) - - 3. Total CENVAT/Input Tax Credit Available (C) (A+B) 27,73,302 - 4. Input Tax Credit of GST Availed (D) - 1,03,72,468 5. Turnover for....
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....th regard to ITC of Rs. 53,198/-, which was not included in the DGAP Report, it was submitted that DGAP investigated the matter upto 31.03.2019 and ITC availed in the GST Returns upto 31.03.2019 had been taken for working out profiteering. The Respondent claimed that the above said ITC availed in future returns and should be included in the report of the DGAP was not sustainable as investigation period was taken upto 31.03.2019 only. 7.4 DGAP had erred in not considering 3 vacant flats having total area of 2316 Sqft in total saleable area. The total saleable area had been taken from the Area declared by the Respondent in RERA Registration. Real Estate Regulatory. Authority (RERA) was a statutory body to protect the interests of home buyers and it was mandatory for developer to furnish all information of the project e.g. saleable area, project plan, government approvals, land title status, schedule of completion etc. 8. 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 fr....
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....ulation. DGAP had stated that he had considered records of RERA, wherein he should have appreciated the saleable area incorporating above flats in Annexure K to the Respondent's submission dated 22.03.2021. 8.7 Further DGAP should have also appreciated that materials were used for developing those thus being integral part of building and GST credits was considered for them in calculation and hence the saleable area of said flats cannot be overlooked in calculating profiteering amount which would make the formatted calculation invalid on account of matching concept for numerator and denominator. 8.8 Considering above facts & circumstances. even if he adopts the methodology of DGAP inserting the correct facts and figures the profiteering amount shall not exceed Rs. 18,94,130/- 9. We have carefully considered the Report furnished by the DGAP, the clarifications filed by him and the records or the case Section 171 of the CGST Act, 2017 provides that any reduction in the rate of tax on any supply of goods or services or benefit of Input Tax Credit shall be passed on to the recipient by way of commensurate reduction in price. In the instant case, there is no reduction of rate of....
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....that, he has reversed Rs. 53.82,926/- of input tax credit as per formula suggested by CBIC on opting for the scheme under Notification 03/2019-Central Tax (Rate) w.e.f. 1.04.2019 and has also reversed Rs. 35,64,714/- of input tax credit on account of Units remaining unsold on date of issue of Occupation Certificate in October. 2019. 10.3 It is the Respondent's submission that. if such reversals of Rs.53,82,926 + Rs.35,64,714 Rs. 89,47,640/-is taken into consideration from the total ITC availed from 1.07.2017 onwards for the project "Sanghvi Solitaire", then, there cannot be any calculation of profiteered amount of Rs.48,54,321/-+12% GST thereon Rs. 54.14,439/,- as the profiteered amount calculated by the DGAP would be More than the benefit or ITC available to them. 11. The Authority finds that, the methodology adopted by the DGAP in Tables A & B of its Report awe based on a comparison of the ratio of ITC over turnover of the Respondent between April, 2016 to June, 2017 and from July, 2017 to March, 2019. This refers to the actual credits taken in these two periods and do not pertain to any ITC lying in the credit of the accounts of the Respondent as on 31.03.2016 or 30.06.201....
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....ts in terms or section 171 of the CGST Act, 2017 is Rs.48,54.321/- + Rs. 5,60,118/- = Rs. 54,14,439/-. Hence, such contention of the Respondent is not sustainable. 12. The Respondent has contended that the Applicant No. 1 bought the house in June, 2018, much after the introduction of Gin and being completely aware while finalising the price of the said flat that the adequate tax benefit has been already considered in the price that was offered to him-and he agreed to buy the flat. The Respondent has also-contended that with effect from 01.04.2019. no benefit of ITC was available that was considered while fixing the Sale price, which. should have been home by the Applicant No. 1 as per the terms of the Agreement for Sale. Further. the Respondent has claimed that as per the Agreement for Sale. the sale price was exclusive of all the taxes-including GST and all such taxes applicable were to be borne by the Applicant No, 1 alone. The Respondent further claimed, that the cost of construction was also escalated due to non-availability of ITC which was considered while fixing the Sale Price. In this connection, the Authority finds that the Respondent was eligible to avail credit of ....
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.... periods pm 1.07.2017 (carried forward) and post 1.07.2017. 14. The Respondent also contended that the DGAP has not considered 3 vacant flats having total area of 2316 sq. ft. in total Saleable area. However, the DGAP ha clarified this contention and submitted that the total saleable area has been taken from the RERA Registration. The RERA is a statutory body to protect the interest of homebuyers and it is mandatory for the builders/ developers to furnish all information regarding the project to them. We find merit in the record relied upon by the DGAP for its calculation and the Respondent's contention is without any basis. 15. In view of the above facts, the Authority finds that the benefit of additional Input tax Credit of 5.86% of the turnover has accrued to the Respondent for the project "Sanghvi Solitaire". This benefit was required to be passed on to the recipients. Thus. Section 171 of the CGST, 2017 has been contravened by the Respondent, inasmuch as the additional benefit of ITC @5.86% of the base price received by the Respondent during the period 01.07.2017 to 31.03.2019, was required to be passed on by the Respondent to 17 recipients including the Applicant no. Th....
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....ed to ensure compliance or this Order. It may be ensured that the benefit of ITC as determined by the Authority as per the Annexure 'A' of this Order be passed on along with interest @18% to each homebuyer/customer. if not already passed on. In this regard an advertisement may also be published in a minimum of two local Newspapers/Vernacular press in Hindi/English/Local language with the details i.e. Name o I the builder Respondent M/s Sanghvi Premises Pvt. Ltd. Project- "Sanghvi Solitaire", Location- Borivali. Mumbai. Maharashtra and amount of profiteering Rs. 54,14,439/- so that the Applicant No. 1 along with Non-Applicant homebuyers/customers/recipients can claim the benefit of ITC which has not been passed on to them. Homebuyers/customers/recipients may also be informed that the detailed NAA Order is available on Authority's website www.naa.gov.in. Contact details concerned Jurisdictional Commissioner CGST/SGST for compliance of this Authority's order may also be advertised through the said advertisement. 19. Since there are other Projects/Blocks being conducted by the Respondent under the single GST Registration No. i.e. 27AAACL0598D1ZM the Authority has reason to believe t....