TaxTMI 
TaxTMI 
2022 (10) TMI 368
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....n filed by the Applicant No. 1 under Rule 128 of the Rules, alleging that he purchased an EWS House in the Project at Kamayani Nagar at Rau, Indore from the Respondent in May, 2019 and the Respondent charged GST @ 12% from him instead of 1%. 2. The DGAP in his Report dated 15.12.2021, inter-alia stated that i. The said complaint of the Applicant No. 1 was earlier received by the Authority, which was forwarded by Authority to Commissioner of State Tax, Indore for necessary action with the remarks "Since, the issue doesn't seem to be pertaining to profiteering but might involve wrong charging of GST". However, the Madhya Pradesh State Level Screening Committee examined the said application and observed that since the Applicant's No. 1 house was an EWS House, the applicable GST rate levied on EWS Houses was 8% under affordable Housing Scheme whereas the Respondent had charged 12% GST from the Applicant No. 1 and hence forwarded the matter to the Standing Committee on Anti-profiteering for further investigation. The Standing Committee on Anti-profiteering being satisfied by the State Screening Committee report, decided to forward the said application to the DGAP for furth....
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....MW(C) No. 3/2020. vi. The period covered by the current investigation was from 01.07.2017 to 30.11.2020. vii. The Respondent replied vide letter and e-mail dated 08.09.2021 and among other documents, furnished the copy of agreement entered by him with the developer M/s. Shekhar Construction, Flat No. 3, 5 Geeta Bhawan Road, Indore and submitted that in the Project at Kamayani Nagar, the development work of the Project was assigned to M/s. Shekhar Construction. viii. On the basis of the above submission of the Respondent, an addendum to the notice of initiation of investigation was issued on 30.09.2021 for including M/s. Shekhar Construction as a Co- Respondent in the ongoing investigation. ix. In response to the notice dated 22.01.2021 and subsequent reminders/summons/e-mails, the Respondent submitted the following documents/information/reply vide his letters/e-mails dated 08.09.2021 14.10.2021, 30.11.2021 and 03.12.2021. a. Copies of GSTR-1 and GSTR-3B Returns for the period July, 2017 to November, 2020. b. Electronic Credit Ledger for the period July, 2017 to November, 2020. c. ST-3 returns for the period April, 2016 to June, 2017. ....
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.... collected the same and paid to the GST Department. However, he had not taken any ITC of GST paid by the contractor, as the work was issued during the pre-GST regime and contract was given inclusive of tax and the contractor had not issued any separate GST invoice due to which the Respondent was not able to take credit of the same. g. About availment of GST, in pre-GST regime, the Respondent was having practice of giving tender/contract to the developer on inclusive basis, but under GST regime, he was giving contract on tender value plus GST i.e., the development work was given to the contractor at the rate exclusive of GST and ITC of the GST paid was duly taken by his Head Office and competent authority at the time of determining the value of unit had taken due care of Input Tax Credit. In the previous reply the fact of non-taking of ITC was mentioned, as earlier he was not having practice of paying any tax separately i.e., contract value was inclusive of all taxes. h. Regarding booking of unit on 22.12.2016, the amount which was received by the Respondent was not booking but just amount received by the Respondent along with application for registration for allot....
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....evelopment of project. Local Authority had granted the development permission for development of the project on 01.01.2018. Development work was assigned to different contract in the GST regime where in it was clearly mentioned that GST would be separately paid. l. In the application form for seeking allotment of unit in the project, it was clearly mentioned that the allottee was required to make the payment of GST separately and in the present case the GST had been charged accordingly. m. The Respondent was being a Govt. Organisation keeping its record systematically and entire amount of GST collected from the allottee had been properly deposited along with GST Return. n. Determination of price of unit was made in the GST regime and at the time of fixing price of units, the Respondent was considering the effect of input tax available on input services taken for the development of the Project, so there was no issue of anti-profiteering against the Respondent. o. Regarding non-availment of ITC, in the previous letter, older working pattern was mentioned but during GST regime, the Respondent was giving contract on contract price plus GST i.e., he w....
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....f hearing by via virtual mode so that his case could be decided on merit considering all the facts and figures. xi. In response to the addendum to notice dated 30.09.2021 and subsequent reminders/e-mails, the Co-Respondent submitted the following documents/information/reply vide his letters/e-mails dated 01.11.2021 02.11.2021 and 11.11.2021. a. Copy of all agreements and tender documents for the construction of 02 HIG 'B' Type Duplex, 11 MIG & 17 EWS houses at "Kamayani Nagar". b. Copy of Electronic Credit Ledger for the period July, 2017 to November, 2020. c. Copy of Tran-1. d. Details of applicable tax rates, Pre GST and post GST. e. Copies of GSTR-1 for the period July, 2017 to November, 2020 and GSTR-9 Returns for the period July, 2017 to December, 2019. f. Balance Sheet, P & L with all schedule for FY 2016-17, 2017- 18, 2018-19, 2019-20. g. All Invoice/Bills related to "Kamayani Project" and Completion Certificate. h. Status of Project at "Kamayani Nagar" - project completed and handed over to the Respondent on 26th Feb 2019. i. Copy of Assessment Order for FY 2016-17 and VAT return sum....
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.....G and 17 E.W.S houses at Kamayani Nagar (23.35 Acre land). Also, Work Order dated 01.01.2018 was issued to the Co-Respondent by the Respondent for commencement of construction work. Further, the allotment letters for flats had been issued by the Respondent and Respondent had raised the demands (including Service Tax/GST) from the Applicant No. 1 and other buyers of the Project at "Kamayani Nagar". Hence, the Co-Respondent was the sub-contractor while the Respondent was the actual owner of the Project. xvii. The Respondent had contended that during the period from April, 2016 to June, 2017, as Service Tax was applicable, so the Respondent had collected the Service Tax and paid to the Service Tax department. However, on perusal of Service Tax Returns (ST-3) for the period April, 2016 to June, 2017, it was noticed that the Respondent had not shown any taxable turnover therein. However, it was also pertinent to mention here that on perusal of home buyers list provided by the Respondent, it had been observed that the Respondent had raised demands of Rs.6,88,000/- from 4 home buyers during the period April, 2016 to June, 2017. Therefore, the contention of the Respondent was incorrect....
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....paid was duly taken by his Head Office and also during Pre-GST regime all the Returns and other compliances were made in his division only but after post-GST regime all the compliances were made at HO Level, so he requested that his previous letter might please be treated as amended in the light of information provided in his letter dated 29.11.2021, submitted through email dated 30.11.2021. Therefore, the contention of the Respondent that he had not taken any ITC of GST paid by the contractor, as the work was issued during the pre-GST regime and contract was given inclusive of tax, was incorrect in entirety. xxi. Furthermore, the Respondent had also contended that he was unable to avail the ITC of GST because the Co-Respondent had not issued any separate GST invoice. This contention of the Respondent was also incorrect. In this regard, it was observed that the Co-Respondent had issued GST invoices to the Respondent for the Project work at Kamayani Nagar, Rau, Indore and the copies of which had been submitted by the Co-Respondent and details of which were given below in the Table-A below: Table-'A' (Amount in Rs.) S.No. Invoice No. Invoice date Basic Am....
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....e same to his rightful contender, that was the homebuyers of the above said Project. xxv. Sufficient opportunity of submission of details in-person, writing and e-mails had already been provided to the Respondent and DGAP had taken note of all such submissions made by the Respondent till date and duly addressed him in the investigation Report. xxvi. From the above, it revealed that an amount of Rs. 23,50,566/- was paid by the Respondent to the Co- Respondent as GST amount applicable on the basic amount of Rs. 1,95,88,052, for the construction service supplied by the Co-Respondent to the Respondent in respect of Project at Kamayani Nagar. Hence, the Respondent was eligible to avail this amount of tax paid i.e., Rs. 23,50,5661- as ITC of GST in his GST Returns and offset his tax liability. The Respondent vide his submission through email dated 30.11.2021, had confirmed that the ITC of GST paid to the sub-contractor was duly taken by his Head Office. Hence, the Respondent had benefited from additional ITC of GST available to him, which he should have passed on to the customers of 17 EWS, 11 MIG Junior and 02 HIG Type B houses, by way of commensurate reduction in basic prices in ....
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.... 9. Ratio of Cenvat/Input Tax Credit to Turnover (I=H/E*100) 0.00% 5.92% From the above Table-`B', it was clear that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 0% and during the post-GST period (July, 2017 to November, 2020), it was 5.92% in respect of the 17 EWS, 11 MIG Junior and 02 HIG Type B houses at Kamayani Nagar. This clearly confirmed that post-GST, the Respondent had benefited from additional ITC to the tune of 5.92% in respect of the above Project. xxviii. It was observed that the Central Government, on the recommendation of the GST Council, had levied 18% GST on construction service (effective rate was 12% in view of 1/3rd abatement on land value), vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. However, the GST rate on construction of "Economically Weaker Section (EWS) Houses" constructed under Affordable Housing, was reduced to 12% (effective rate was 8% in view of 1/3rd abatement on value) from 18% vide Notification No. 1/2018 -Central Tax (Rate) dated 25.01.2018. It was also observed that the Respondent had charged 12% GST from all the ....
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....iods. In the pre-GST period (April, 2016 to June, 2017), only Service Tax @ 4.5% was payable on the construction value/BSP as the Respondent was neither charging nor paying VAT and in the post-GST period (July, 2017 to July, 2019), the effective GST rate was 8% on construction service (in case of EWS Houses). Therefore, the applicable tax rate on construction service in pre-GST period was 4.5% (Service Tax @ 4.5% only). Hence the effective tax rate in construction service has, in fact, increased from 4.5% in the pre-GST period to 8% in the post-GST period (from 25.01.2018). Hence there was no rate reduction in post GST period. xxx. Further, it was observed that Applicant No. 1 had alleged that the Respondent had charged GST @12% instead of 1%. On perusal of the application of Applicant No. 1, the documents submitted by the Respondent and the relevant provisions of the CGST Act, 2017 and the Rules, the allegation of the Applicant No. 1 appeared to be partially correct. It was observed that the Respondent had charged GST @12% from the Applicant No. 1 whereas the actual applicable rate of GST was 8% in the cases of all EWS houses as stated in above para. Hence the Respondent had ch....
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....ngs are received, the approval of the competent authorities taken for launching of the scheme. ii. The Respondent had obtained the development permission of local authority for development of the Project after receiving the permission of competent authority. Local Authority had granted the development permission for development of the project on 01.01.2018. The development work was assigned to different contractor in the GST regime where in it was clearly mentioned that GST would be separately paid. Further, in the application form for seeking allotment of unit in the Project, it was clearly mentioned that the customers/homebuyers was required to make the payment of taxes and in the present case the taxes had been charges accordingly. The Respondent, being a Govt. Organization, is keeping his record systematically and entire amount of GST collected from the customers/homebuyers had been properly deposited along with GST Return. iii. At the time of registration, value is not fixed as the development cost is not available so only tentative value is disclosed to the allottee, which include service tax paid at various stages during construction, which included cost an....
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....DGAP had inter-alia submitted that:- i. Section 171(1) of the CGST Act, 2017 which governs the anti-profiteering provisions under GST, reads as "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." Therefore, Section 171 (1) of the CGST Act, 2017, requires every supplier to pass on the benefit of reduction in rate of tax or the benefit of ITC to his recipients by reducing the price commensurately. The Respondent had misinterpreted the investigation Report submitted by the DGAP. Further, it was pertinent to mention here that the Respondent had raised demands/received advance from the home buyers in pre-GST period i.e., 01.04.2016 to 30.06.2017. Therefore, it was amply clear that the base price of the units fixed by the Respondent in pre-GST regime (considering the loss of ITC) should had been commensurately reduced by the Respondent in the GST regime and due benefit of ITC must had been passed on to the customers/buyers of the units in terms of Section 171 of the CGST Act, 2017. Hence, it was concluded that in the instant case, during the period of investigation....
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....Complex Service" and also the said Notification did not restrict any service provider from the taking CENVAT Credit of input services in the Service Tax regime. Therefore, the claim of the Respondent was incorrect in entirety. iii. Terms and conditions agreed between Respondent and Co-Respondent need no clarification as it did not in any way impact the amount of profiteering computed by the DGAP. iv. During course of investigation, the Respondent submitted before the DGAP that since the liability of VAT Tax was discharged by the contractor so the Respondent was not required to pay any VAT Tax, so no VAT Returns were filed by the Respondent and also no amount was recovered by the Respondent from the home buyers on account of VAT. It was further pertinent to mention here that despite receiving advances/payments from home buyers in pre-GST period, the Respondent entrusted the construction to the Co- Respondent in GST regime, there was no VAT involved in the work order. v. However, the Respondent in his submissions had claimed Rs. 46,209 as ITC of VAT paid on inputs in his hypothetical Table-B prepared by the Respondent which was incorrect. Moreover, the rati....
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....guments advanced by the Respondent. On examining the various submissions, the Authority finds that the following issues need to be addressed:- i. Whether there was any violation of the provisions of Section 171 (1) of the CGST Act, 2017 in this case? ii. If yes, what was the additional benefit of ITC that has to be passed on to the recipients and whether various issues raised by the Respondent are tenable? 9. The Respondent has mainly contended that the Project started after implementation of the GST, as all permissions were obtained in the GST era and that the work has commenced after GST introduction. It is also informed that there is no change in the GST rate during the said period, hence the provision of Section 171(1) are not applicable on him. It is also submitted by the Respondent that they are an organisation of the State government and before launching any new scheme, survey of the respective area is conducted to ascertain the actual housing requirement and invite pre-launch booking of the proposed scheme. If sufficient number of bookings are received the approval of the competent authorities is taken for launching of the scheme. It is also submitted b....
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....ments from home buyers in the pre-GST period but the Respondent entrusted the construction to the contractor in GST regime, there was no VAT involved in the work order. The Respondent has submitted that since the liability of VAT Tax was discharged by the contractor so the Respondent was not required to pay any VAT Tax, so no VAT Returns were filed by the Respondent and also no amount was recovered by the Respondent from the home buyers on account of VAT. Further, the Respondent has claimed Rs.46,209/- as ITC of VAT paid on inputs in his hypothetical Table-B prepared by the Respondent which is incorrect. Moreover, the ratio arrived as 7.2% at Sl. No. 9 for pre-GST period in his Table was also incorrect. The Authority holds that the DGAP has computed the profiteered amount by taking ITC to turnover ratios in the pre-GST & GST periods into account which is correct, reasonable and logical and in accordance with the mandate of Section 171 of the Act. 11. The Respondent has also referred to CAG study report titled as "Implementation of Value Added Tax in India - Lessons for transition to Goods and Services Tax -A Study Report". It is claimed by the Respondent that, in the said CAG re....
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....oject of the Respondent at Kamayani Nagar at Rau, Indore, the details of which are mentioned in Annexure-16 of the Report, which includes the amount of Rs. 52,873/- of the Applicant No. 1. 13. For the reasons and discussions made hereinabove, the Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP's Report or the methodology adopted and hence, the Authority determines the profiteered amount for the period from 01.07.2017 to 30.11.2020, in the instant case, as Rs. 26,33,536/- for the Project of the Respondent at Kamayani Nagar at Rau, Indore. 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 commensurate with the benefit of ITC received by him as has been detailed above. 14. Given the above discussions, the Authority finds that the Respondent has profiteered by Rs. 26,33,536/- for the Project at Kamayani Nagar at Rau, Indore during the period of investigation i.e. 01.07.2017 to 30.11.2020. The above amount that has been profiteered by the Respondent from his home buyers/customers/recipients in the above said Project shal....
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.... passed on to each home buyer/customer/recipient as per Annexure- 'A' attached with this Order along with interest @18% as prescribed, if not paid already. In this regard an advertisement of appropriate size to be visible to the public may also be published in a minimum of two local Newspapers/vernacular press in Hindi/English/local language with the details i.e. Name of the builder (Respondent) -M/s Madhya Pradesh Housing and Infrastructure Development Board, Project at Kamayani Nagar, Rau, Location- Indore, Madhya Pradesh and amount of profiteering i.e. Rs. 26,33,536/- so that the concerned home buyers/customers/recipients can claim the benefit of ITC if not passed on. Homebuyers/customers/recipients may also be informed that the detailed NAA Order is available on Authority's website www.naa.gov.in. Contact details of the concerned Jurisdictional CGST/SGST Commissioner may also be advertised through the said advertisement. 20. The concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding the compliance of this Order to this Authority and the DGAP within a period of 4 months from the date of this Order. 21. Further, on perusal of the Re....