TaxTMI 
TaxTMI 
2022 (10) TMI 245
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....;s project "ATS Picturesque Reprieves", situated at Plot No. SC-01, Sector-152, Noida, Uttar Pradesh. The Applicant No. 1 alleged that the Respondent had not passed on the commensurate benefit of input tax credit (ITC) to him by way of commensurate reduction and charged GST @ 12 % on the amount due to him against payment. He had submitted that the Respondent always communicated that he was working on the computation and would pass on the benefit of ITC (if determined) after the project completion/ handing over the project. However, he had not given certainty of doing the same. The Applicant No. 1 providing a copy of Allotment letter (consisting breakup of consideration, payment plan, and flat description) along with his application in form APAF, has requested to keep his application confidential. 2. On receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 15.10.2020, a Notice under Rule 129 of the CGST Rules 2017, was issued on 06.11.2020 by the DGAP, calling upon the Respondent to reply as to whether he admitted that the benefit of input tax credit had not been passed on to the recipients by way of commensurate reduction in price and if so, to suo....
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....laneous Application No. 665/2021 in SMW (C) No. 3/2020. 7. In response to the Notice dated 06.11.2020 and various reminders and Summons, the Respondent has submitted his replies vide letters/e-mails dated 26.11.2020, 18.12.2020, 23.12.2020, 22.01.2021, 02.02.2021, 03.02.2021, 05.02.2021, 26.02.2021 23.03.2021, 26.012021, 15.04.2021, 20.07.2021, 23.07.2021 and 27.08.2021, which have been summed up by the DGAP as under:- (a) The Respondent was engaged in the construction of residential projects and presently he has two projects in running. The project 'ATS Picturesque Reprieves' at Noida was launched in the end of 2016 which is still under construction and Occupancy Certificate has not been received by him. (b) He has opted old scheme for discharging GST @ 12% (after 1/3rd abatement towards Land) in accordance with the Notification No. 3/2019-Central Tax (Rates) dated 29.03.2019 w.e.f. 01.04.2019. (c) The instant project "ATS Picturesque Reprieves Phase 1" has 932 units with total saleable area of 21,79,800 sq. ft. The tower wise summary details are as under in Table-'A': Table-A S. No. Number of Towers Type of Unit Unit Size Sq. Ft. No. of Unit per tower Total ....
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.... was benefit of reduction in the rate of tax or input tax credit on the supply of construction service by the Respondent, on implementation of GST w.e.f. 01.07.2017 and if so. * Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the Central Goods and Services Tax Act, 20 1 7. (ii). The Respondent, vide e-mail dated 23.03.2021, submitted copies of demand letters and sale agreement for the sale of flat no. 18101 in tower-18, measuring 2350 square feet, at total base price of Rs. 1,04,91,853/- (including two car parkings). The schedule of payment is furnished in Table-'B' below:- Table-B S. No. Payment Stage (Basic) % Basic Amount 1. At the time of Booking 9.4% 9,77,878 2. At the time of allotment 9.6% 9,95,494 3. Within 60 days from date of booking 9.5% 9,86,686 4. On Completion of 12th Floor Roof Slab 9.5% 9,86,686 5. On Completion of 18th Floor Roof Slab 9.5% 9,86,686 6. On Completion of 24th Floor Roof Slab 9.5% 9,86,686 7. On Completion of 30th Floor Roof Slab 9.5% 9,86.686 8. On Completion of Top Floor Roof Slab 4.75% 4,93,343 9. On Completion of Brick Work 4.75% 4,93,343 10. ....
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....fit of additional input tax credit available to them post-GST. (iv). The impugned project 'ATS Picturesque Reprieves' was being developed in phased manner hence it was registered with RERA under two different registrations. Details are given below in Table- 'C':- Table- C S.No. Project Name RERA Registration No. RERA Registration Date Remark 1. ATS Picturesque Reprieves Phase 1 UPRERAPRJ631 01.08.2017 Pre-GST project 2. ATS Picturesque Reprieves Phase 2 UPRERAPRJ396176 27.02.2019 Post GST projected opted to pay 5% GST without ITC (v). In the instant case, since, the reference received from the Standing Committee for initiation of investigation pertains to the Applicant No. 1s' unit situated in 'Phase-I' which has a separate RERA Registration, the scope of the present investigation has been limited to the extent of construction service supplied by the Respondent in the project "ATS Picturesque Reprieves Phase-1". Further as per the Respondent, he had not availed any ITC for Phase-2 of the said project. (vi). On the allegation of profiteering, prior to GST introduction, the Respondent was eligible to avail Credit of Service Tax paid on in....
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....2%) of the turnover. Accordingly, the profiteering has been examined by comparing the applicable tax rate and input tax credit available in the pre-GST period (April, 2016 to June, 2017) when Service Tax @ 4.50% was payable with the post-GST period (July, 2017 to September, 2020) when the effective GST rate was 12% (GST @18% along with 1/3rd abatement for land value) on construction services as per Notification No.11/2017-Central Tax (Rate), dated 28.06.2017. However, on the basis the figures contained in Table- 'D' above, the comparative figures of the ratios of input tax credits availed/available to the turnovers 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, are tabulated in Table - 'E' below. Table-E (Amount in Rs.) S.No. Particulars Post-GST 1. Period A 01.07.2017 to 30.09.2020 2. Output GST Rate (%) B 12.00 3. Ratio of CENVAT credit/ Input Tax Credit to Total Turnover as per table - 'D' above (%) C 5.81% 4. Increase in input tax credit availed post-GST (%) D=5.81% less 0.12% 5.69% 5. Analysis of Increase in input tax credit; ....
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....m 01.07.2017 to 30.09.2020 (period of investigation). In any case, if the input tax credit in respect of these 266 units is considered for calculation of profiteering in respect of 535 flats where payments have been received during period under investigation, the input tax credit as a percentage of turnovers would be erroneous. Hence, the benefit of input tax credit in respect of these 266 units might be calculated when the consideration is received from such units by taking into account the proportionate input tax credit in respect of such units. (xi). The Respondent has claimed that he had passed on the benefit of Rs. 29,63,18,048/- (Rs. 24,46,34,694/- on the basic selling price itself at the time of booking and Rs. 5,16,83,534/- on tax invoices issued to customers) upto 30.09.2020 to these 535 home buyers and copies of invoices, price sheets and signed undertakings by the home buyers corroborating the said claim to the DGAP which were duly verified by him with the list of home buyers and found to be correct. Further, to confirm the aforesaid claim of the Respondent, DGAP had sent e-mail/reminders dated 16.07.2021 and 11.08.2021 to 207 (other than the Applicant No. 1) out of 53....
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....rue to such recipients. (xiv). In conclusion, DGAP has submitted that the Respondent had benefitted to the additional input tax credit to the tune of 5.69% of the turnover in the post-GST which was required to be passed on by him to the respective buyers. On this account, DGAP has observed that the Respondent is yet to pass an additional amount of Rs. 10,27,63,809/- (including GST) to the 466 buyers as mentioned at Sr. No. 1 & 3 of Table-'F' above. These buyers are identifiable as per the documents provided by the Respondent, giving the names and addresses along with Unit No. allotted to such buyers. Therefore, this additional amount of Rs. 10,27,63,809/- is required to be passed on to such eligible buyers. Further, it also is observed that the Respondent had not raised any demand/collected any amount from the Applicant No. 1 during the period 01.07.2017 to 30.09.2020 which has also been confirmed by the Applicant vide his e-mail dated 17.07.2021, therefore, no profiteering has been computed with respect to the unit booked by the Applicant No. 1. The benefit of input tax credit in respect of his units may be calculated whenever demand is raised or the consideration is rec....
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....me. (iii) He had incurred extra cost due to increase in the tax rate on inputs. In any case, there is increase in ITC due to increase in tax rate on inputs/ input services then it doesn't mean that he has benefitted to extra ITC due to introduction of GST. (b). While calculating profiteering, the DGAP has taken Pre-GST Cenvat credit of Rs. 38,26,487/- whereas the actual value of Cenvat credit availed during the period was Rs 94,34,901/- accordingly, the profiteered amount would be reduced. Hence, the said benefit be allowed and profiteering amount he re-calculated. (c). He had passed on the ITC benefit to all the buyers who booked flats in pre-GST as well as post GST period either through Credit Notes/Invoices or at the time of Agreement even though 85 buyers had confirmed the receipt of ITC benefit. He also claimed that the Customers who did not confirm/reply, could not be treated as if no ITC benefit had been passed to them as there was no denial of receipt of ITC benefit, has been received. The DGAP's Report is erroneous to the extent it interprets "no Confirmation" as no ITC benefit passed on. (d). Section 171 of CGST Act, 2017 & Rule 126 of the CGST Rules, 2017....
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.... to be necessarily determined by offsetting any cost incurred by the supplier since it could not have been intended by the legislature that the supplier will bear the burden of any costs incurred towards providing the benefit of the increased ITC. Therefore, Section 171 of the Act is incomplete and vague as it does not define/describe the word "Commensurate reduction". (iii). Concept of anti-profiteering as given under Section 171 of the Act has ignored the inflation and other factors adding to the cost of other inputs used by taxpayer. Other factors such as increased cost of raw materials (for instance, the price of steel etc) has not been considered in the computation. Therefore, findings of DGAP report are based on a faulty interpretation of section 171 of the CGST Act. (iv). No standard formula for profiteering has been prescribed under the law. Excessive delegation of power to the authorities. Methodology should have been determined by the Parliament. Section 171 of the Act is ultra vires the constitution. (v). The Authority does not have a judicial member in its committee. Therefore, it must consist of a judicial member in order to decide the case. (vi). Section 171 (....
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....pondent is incorrect. (iii). Upon contention mentioned at para 10 (c) supra:- The verification of Respondent's claim of having passed on benefit of ITC to the buyers was done by the DGAP on the basis of replies received from the Applicant No. 1 & other buyers and it was observed that 85 home buyers out of 207 home buyers (to whom emails were sent by the DGAP for confirmation of receipt of ITC benefits), have confirmed the receipt of ITC benefit which was required to be passed on to them and the same has been incorporated in Table-F of para 22 of the Report by the DGAP. Further, in respect of other 445 home buyers from whom no reply / confirmation has been received or email IDs have not been provided by the Respondent, the DGAP vide Report dated 02.09.2021 has already concluded that the Respondent has to pass on the ITC benefit to them. Hence, Respondent's contention is erroneous and denied. (iv). Upon contention mentioned at para 10 (d) supra:- The objection raised pertains to legal interpretation of the provisions of Section 171 of CGST Act 2017, hence, he did not offer any comment on it. (v). Upon contention mentioned at para 10 (e) supra:- The DGAP has initiated in....
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....he submissions filed by the Respondent and the other material placed on record including submissions made during hearings. The Authority finds that the Applicant No. 1 (who requested to keep his application confidential) had filed a complaint against the Respondent alleging that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in price on the purchase a flat in the "ATS Picturesque Reprieves" Project which was executed by the Respondent at Sector-152, Noida, Uttar Pradesh. The said complaint was examined by the Standing Committee on Anti-Profiteering and forwarded to the DGAP for detailed investigation on 15.10.2020, who vide his investigation Report dated 02.09.2021 furnished to this Authority, had stated that the Respondent is engaged in the construction of residential projects, has constructed/developed the impugned project in two phases comprising "ATS Picturesque Reprieves Phase-I and Phase-II" having separate RERA registrations. Since Phase-II of the project attracts 5% GST without ITC and the complaint filed by the Applicant No.1 was pertaining to Phase - I therefore the investigation of the DGAP is restricted to Phase - I of the sa....
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....rcentage of the benefit of additional ITC which the Respondent was required to pass on to the flat buyers/recipients. The above ratios had been computed by the DGAP based on the data/details provided by the Respondent which have been duly verified from his Service Tax and GST Returns filed by him for the period April 2016 to June 2017 and July 2017 to September 2020 respectively. Since, the ratios calculated by the DGAP are based on the factual record submitted by him; hence they can be relied upon while computing the profiteered amount. The above methodology has been approved by this Authority in all such cases where the benefit of ITC was required to be passed on to the flat buyers/recipients of construction service. 16. The Authority finds that the contentions of the Respondent mentioned at para 10 (d) & (f) supra, are completely incorrect as the Parliament as well as all the State Legislatures have delegated the task of framing of the Rules under the CGST Act, 2017 on the Central Government as per the provisions of Section 164 and 171 (3) of the CGST Act, 2017. Section 171 of the CGST Act, 2017 and the Rules do not infringe upon the fundamental right of equality or right to ca....
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....d by any of the High Court against the said provisions as on till date. Therefore the contentions of the Respondent are not maintainable. 20. In view of the above, discussion, findings and after taking into consideration the provisions of the law and the submissions made by the Respondents, the issues to be decided are as under:- i. Whether there was benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent on implementation of GST w.e.f. 01.07.2017 and if so, ii. Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. 21. In the instant case, there is no reduction of rate of tax during the relevant period and the only issue which is required to be decided by the Authority is as to whether Respondent is required to pass on the benefit of input tax credit. As mentioned in earlier paragraphs, DGAP has carried out investigation in the subject matter and collected relevant information/evidences from the Respondent and after the analysis of the same the DGAP has come to a conclusion that the Respondent has gained benefit of ITC on the supply of Construction services after th....
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....g the provisions of Section 171 (1) and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the above Act. As the said provision has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019, the Respondent is liable to penalty for the amount profiteered by him from 1.01.2020 onwards. Accordingly notice be issued to the Respondent for such purpose. 26. Accordingly, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017, orders that the Respondents shall reduce the prices to be realized from the home buyers/recipients of supply in the above Project commensurate with the benefit of ITC received by him as detailed above. 27. This Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of CGST, Noida and SGST, Lucknow, Uttar Pradesh to monitor compliance of this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent (GST Registration No. 09AAJCA4360K1ZF) as determined by the Authority, is passed on to all the eligible home buyers/recipients of supply. It may be ensured that the benefit of ITC is passed on to each home buyer/recipient of ....