TaxTMI 
TaxTMI 
2022 (9) TMI 1511
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.... Silas", situated at Sadarmangala, K R Puram, Bangalore-560048 on introduction of GST w.e.f. 1-7-2017, in terms of section 171 of the CGST Act, 2017. 2. The DGAP in his report dated 25-2-2021 had inter alia, stated that: (a) The Karnataka State Screening Committee on Anti-Profiteering examined the said Application and forwarded the same with his recommendation, to the Standing Committee on Anti-Profiteering for further action, in terms of rule 128 of the Rules. (b) The aforesaid application was examined by the Standing Committee on Anti-profiteering, which 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 Input Tax Credit had been passed on by the Respondent to the Applicant No. 1 in respect of construction service supplied by the Respondent. (c) On receipt of the reference from the Standing Committee on Anti-profiteering, a Notice under rule 129 of the Rules was issued by the Director General of Anti-profiteering, calling upon the Respondent to reply as to whether he admitted that t....
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....et for FY 2016-17, 2017-18 & 2018-19. viii. Details of VAT, Service tax, ITC of VAT, CENVAT credit for the period April, 2016 to June, 2017 and output GST and ITC of GST for the period July, 2017 to April, 2020 for the project "Bollineni Silas". ix. CENVAT/lnput lax Credit Register for the FY 2016-17, 2017-18, 2018-19 and for the period April, 2019 to April, 2020. x. List of home buyers for the project "Bollineni Silas". xi. Brief profile of the Respondent. xii. Details of applicable tax rates, Pre-GST and Post-GST. xiii. Status of Project as on 30-4-2020. xiv. Copy of Occupancy Certificate. (j) The subject application, various replies of the Respondent and the documents/evidences on record had been carefully examined. The main issues for determination are: - i. Whether there was benefit of reduction in rate of tax or input tax credit on the supply of construction service by the Respondent after implementation of GST w.e.f. 1-7-2017 and if so. ii. Whether the Respondent passed on such benefit to the recipients by way of co....
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.... against changes in tax structure and for the same vide letter dated 3-2-2021, the Respondent were asked to submitted all the documentary evidences to support his claim that benefit of GST ITC was already passed on to the buyers in terms of section 171 CGST Act, 2017 but the Respondent failed to do so. Hence, the above contention of the Respondent was not accepted. (m) As regards the allegation of profiteering, prior to 1-7-2017, i.e.. before the GST was introduced, the Respondent were eligible to avail Service Tax paid on the input services (CENVAT credit of Central Excise duty was not available) in respect of the flats for the project "Bollineni Silas" sold by them. The Respondent were not eligible to avail input tax credit of VAT paid on the inputs as he had opted for composition scheme in the VAT regime. Further, post-GST, the Respondent could avail input tax credit of GST paid on all the inputs and input services, from the data submitted by the Respondent covering the period April, 2016 to April, 2020, the details of the Input Tax Credit availed by them, his turnover from the project "Bollineni Silas" and the ratio of input tax credit to turnover, during the pre....
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.... 5. Increase in input tax credit availed post-GST (%) E= 9.56% less 2.89% 6.67% 6. Analysis of Increase in input tax credit: 7. Demand raised/Advances received during July, 2017 to May, 2020 (Rs.)* F 1,83,96,55,636 8. GST raised over Base Price (Rs.) G=F*B 22,07,58,676 9. Total Demand raised H=F+G 2,06,04,14,312 10. Recalibrated Base Price I=F*(l-E) or 93.33% of E 1,71,69,50,605 11. GST @ 12% J=I* B 20,60,34,072 12. Commensurate demand price K=I+J 1,92,29,84,677 13. Excess Collection of Demand or Profiteering Amount (in Rs. ) L=H-K 13,74,29,635 * The demand raised/advances received during the period 1-7-2017 to 30-4-2020 was net of post O.C. sales, (i.e. excluding 11 buyers who had booked Flats after O.C.) (p) from the calculation explained in Table-B based on the Respondent's submission, that the benefit of lTC which needed to be passed on by the Respondent to the buyers of fiats comes to Rs. 13,74,29,635/- which included 12% GS'I" on the base amount of Rs. 12,27,05,031/- during the period 1-7-2017 to 30-4-2020 in respect of 373 (384-11 (Post OC....
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....should not be accepted and his liability for profiteering in violation of the provisions of section 171 should not be fixed. The Respondent was directed to file written submissions, which had been filed on 14-7-2021 wherein the Respondent had, inter alia submitted following: - A: The applicant had booked the Flat during the post-GST period i.e. on 16 Nov, 2018 and during the such period there was no any change in the rate of GST and hence the provisions of section 171 of GST Act does not apply in this case. Applicant No. 1 who booked the flat No. J703. 07th floor in the J-Block of "Bollineni Silas' vide construction agreement dated 16-11-2018 ( i.e. agreed in constructing and owning apartment was being constructed in a phased manner) in which he had purchased above flat (measuring to 1390 sft) @ Rs. 67,78.367/- (including amenities and taxes and pass on charges) and the entire price of consideration had been paid during 16 Nov. 2018 to 8th March 2019. Further, as per section 171(1) any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices" Th....
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....r. In the instant case, the effective rate of tax (i.e. Service tax and VAT in prc-GST resume) on supply of construction service to the customers had been increased from 11% [i.e. 6% (Service tax) + 5% (Karnataka VAT as register dealer] to 12% (GST). According, there was no drop in case of real estate sector in rate of output tax (GST) when compared to pre-GST period. Therefore, no benefit was required to be passed on to the buyers of flats on account of reduction in the rate of tax. Hence the only issue to be examined was as to whether there was any additional benefit of ITC with the introduction of GST availed by the Respondent or not. C. The proposed Anti-profiteering of additional benefit Input tax credit as arrived by the DGAP was need to be revised as the DGAP was required to consider certain items as detailed below in Table-A of calculating ratio of ITC to the turnover and hence, to the extent of such ignored/resubmitted items the alleged additional benefit of input tax credit need to be revised. As per the master sheet of home buyers list the total area of both pre-GST and post-GST period's home buyer bookings was 1,21,095 Sqft. and 3.76,015 S....
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....duction of such sub-contract's turnover from his turnover and vice versa. Hence, the Respondent was eligible to avail the credit of WCT/deduction of turnover (on which WCT tax was paid by the sub-contractor). Accordingly, the turnover declared by the Respondent in the VAT returns for the period ending 30 June, 2017 was Rs. 61,11,68,770 and on which the WCT paid by the sub-contractor @ 5% was Rs. 3,05,58,439/- for the which the Respondent (as main-contractor) was entitled for WCT credit as per the provisions of Karnataka VAT Act. Further, the Respondent had been assessed under Karnataka VAT Act and, wherein, the Authority allowed the WCT credit i.e. deduction of turnover on which the sub-contractor had paid the WCT. The details of relevant clause under Karnataka Value added Tax Act and copy of assessment orders had been provided for immediate reference. Hence, it was requested to consider the said WCT tax credit for the pre-GST period in calculating ratio of pre-GST ITC to the turnover (pre-GST). Therefore, the DGAP was required to consider the WCT credit to the tune of Rs. 3,05,58,439/-, hence it was requested to consider the said WCT credit which the Respondent was en....
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.... The Respondent was herewith re-submitting the details of said demand details in master sheet of home buyers list. Accordingly, the revised calculation after incorporating the said observations and revised proposed Anti-profiteering amount as arrived was as follows: Table - A' Sl. No Particulars Total (Pre-GST) April, 2016 to July, 2017 Total (July, 2017 to April, 2020) 1. CENVAT of Service Tax Paid on Input Services used for flats (A) 3,94,65,898 - 2. VAT/WCT credit on subcontract (A-l) 3,05,58,439 - 3. Input Tax Credit of GST Available (B) - 21,85,80,476 4. Total CENVAT/Input tax credit available C = (A,A1 or B) 7,00,24,337 21,85,80,476 5. Collection received/receivable against demand for flats as per Home Buyers list (d-1) 18,92,50,513 183,97,15,637 Add: Collection received/receivable against demand for Flats as per Home Buyers list (d-2) 25,85,21,624 Total Collection rec....
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....o made the bookings of flats during Post-GST period F-2 1,59,82,17,981 7. Net Demand raised during the Post-GST period against home buyers who made booking of flats during pre-GST period. F(F1-F2) 1,83,96,53,636 8. GST raised over Base Price (Rs.) G = F*B 2,89,79,719 9. Total Demand raised H=F+G 27,04,77,376 10. Recalibrated Base Price I=F*(l-E) or 100.84% of E 24,35,15,445 11. GST @ 12% J=I*B 2,92,21,853 12. Commensurate demand price K=I+J 27,27,37,299 13. Excess Collection of Demand or Profiteering Amount (in Rs. ) L=H-K 22,59,923 Therefore, based on the above 'Table, the Respondent had neither benefitted from the additional ITC nor had there been any reduction of rate of output tax in the post period. Therefore, the provisions of section 171 of the CGST Act, 2017 did not appear to be attracted to the present case of Respondent and it was requested to drop the proceedings as proposed by the DGAP agains....
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....as change in either output tax rate or increased input tax credit. Further, the flats sold after RERA registration in the GST regime would not be subject to profiteering at all especially when the builder had submitted not to opt for a lower regime i.e. opting for new 5% rate of tax. The Respondent not opted for a lower regime (i.e. opting for new flat GST 5% rate of tax without taking input tax credit) and continued under old regime i.e. declaring the output tax after adjusting the ITC. E: The Anti-profiteering provisions do not apply in this case merely on account of home buyer price change during post-GST period as the Respondent incurred additional costs that leads to increased cost of development of project. The Respondent started real estate development project in Bangalore. Karnataka for the first time and accordingly, as the Respondent was a developer to the market in the state of Karnataka and till the completion of the project the sale bookings were very slow and not even reached the break-even point. Further, the project experienced problems in execution like land clearances, inter departmental clearances, delay in disbursement of funds etc. causing del....
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....contention had also been followed in Philips India Ltd. v. Union of India TS-427-HC-2828 (DEL.)-NT. Ps. Samsonite South Asia (P.) Ltd. v. Union of India 2020 (39) G.S.T.L. J106 (Del.) = [2020] 118 taxmann.com 45/81 GST 161 (Delhi) [15-546-HC-2828(DEL)-NT| and Patanjali Ayurvcd Ltd. v. Union of India 2020 (40) G.S.T.L. J116 Del.) = [2020] 117 taxmann.com 969/80 GST 832 (Delhi) Ors. [15-572-HC-2828(DEL.) NT]. Therefore, based on the above table, it was submitted that the Respondent had neither benefitted from the additional ITC not had there been any reduction of rate of output tax in the post-period. Therefore, the provisions of section 171 of the Central goods and service Act did not appear to be attracted to the present case of Respondent and accordingly the penalty u/s 171(3A) of CGST r.w.r. 133(3)(d) of CGST Rules was not attracted to the Respondent. 4. Since, the quorum of the Authority of minimum three Members, as provided under rule 134 was not available till 23-2-2022, 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, and a copy of the above submissions dated 14-7-2....
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....incorrect. As stated above, the Respondent had been benefitted with additional ITC only after introduction of the GST. This additional benefit of ITC pertains to the entire project or in other words relates to each flat/unit of the project of the Respondent. Hence all unit/flat buyers were eligible to get his due benefit of ITC from the Respondent irrespective of his bookings made in pre-GST or post-GST period. Whatever was the negotiated price, the benefit of' additional ITC had to be specifically passed on to all the recipients by the Respondent. This benefit had to be passed on over and above any other kind of negotiations made with the homebuyers. However, section 171(1) of the CGST Act, 2017 states that "Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices." It was clear from the perusal of the above provision that it mentions "benefit of input tax credit shall be passed on to the recipient" which does not mean that the benefit of input tax credit was to be restricted to the customers/home buyers of pre-GST regime. Therefore, under section 171, the A....
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.... estate sector in the rate of Output tax (GST). This was neither relevant nor a suitable parameter to workout benefit of additional ITC. In the investigation, the quantum of relevant credit available during the pre and post-GST periods was taken on the basis of submission of the Respondent for working out additional benefit of ITC to the Respondent. Furthermore, in the cases of benefit of Input Tax Credit in GST regime, in pre and post-GST regimes, the availability ITC had to be examined and compared. Without doing so, it would not serve the intent of the Statute. Therefore, the practice of comparing pre and post-GST prices and ITC availability was justified and correct. Further, as stated above that ever) recipient/customer was entitled to receive the due benefit of input tax credit from the supplier. C: The proposed Anti-Profiteering of additional benefit input tax credit as arrived by the DGAP was need to be revised as the DGAP was required to consider certain items as detailed below in Table A of calculating ratio of ITC to the turnover and hence, to the extent of such ignored/resubmitted items the alleged additional benefit of input tax credit need to be revised....
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....ch got subsumed in the GST. Out of these taxes, the input tax credit (ITC) of some taxes was not allowed in the erstwhile tax regime. In case of construction service, while the ITC of Service Tax was available, the ITC of Central Excise duty paid on inputs was not available to the service provider. Such input taxes, the credit of which was not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased price. With the introduction of GST w.e.f. 1-7-2017, all these taxes got subsumed in the GST and the input tax credit of GST was available in respect of all goods and services, unless specifically denied. Broadly, the additional benefit of ITC in the GST regime would be limited to those input taxes, the credit of which was not allowed in the pre-GST regime but was allowed in the GST regime. Therefore, in the cases where projects were launched pre-GST regime, the prices of the flats/units/home were fixed in pre-GST regime considering the various factors affecting the cost keeping in mind the prevailing taxes, cost of the raw material and input tax credits available, however, in all such case, there had been availabili....
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....ice of comparing pre and post-GST prices and ITC availability was justified and correct. Further, as stated above that every was entitled to receive the due benefit of ITC from the supplier. Thus, under the provisions of section 171 of the CGST Act, 2017, each and every recipient/customer was entitled to receive the due benefit of input tax credit from the supplier; therefore, the recipients/customers who booked the units in post-GST period was also equally eligible for the benefit of ITC. The case of M/s DRA Aadithya Projects Pvt. Ltd. had not attained finality as the order passed by the Hon'ble Delhi High Court was interim. E: The Anti-profiteering provisions do not apply in this case merely on account of home buyer price change during post-GST period as the Respondent incurred additional costs that leads to increased cost of development of project. The contention of the Respondent was not correct. Input tax credit was available on the inputs (goods and services) purchased/used in the project, which was cost to the Respondent. Hence, when ITC was being considered in the investigation, then, it implies that the cost to the Respondent h....
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.... of the profiteered amount had to be done by taking into account particular facts of each case. Further, the case reference quoted by the Respondent in the matter of Samsung India Electronics (P.) Ltd. (supra) was still sub-judice before Hon'ble Delhi High Court so the contentions of the Respondent regarding constitutional validity of Authority was erroneous. Other cases cited by the Respondent had also not been finalized by the Hon'ble High Court. 5. Copy of the above clarifications dated 7-4-2022 was supplied to the Respondent to file his re-joinder. Further, personal hearing in the matter was held on 8-8-2022, wherein, the Respondent had reiterated his written submissions. The Respondent also filed his additional submissions vide his email dated 8-8-2022. wherein, he has inter alia submitted as under : - The DGAP stated that the Respondent was not eligible to avail Input Tax Credit of VAT paid on Inputs as they have opted for composition scheme in the VAT regime. Therefore, the WCT credit was not considered in the Investigation Report. In respect of VAT/WCT credit under Karnataka Value Added Tax Act, both under composition and non-composition scheme,....
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....actor along with copies of VAT assessment orders of Respondent wherein the VAT department allowed the deduction to the Respondent both turnover and WCT tax paid to sub-contractor. Further, as far as claim of deduction of sub-contractor turnover and WCT tax paid to such sub-contractor is concerned, the Respondent submitted that in the details of Output and Input Tax Statement for the period April 2016 to April 2020. furnished during investigation proceedings the Respondent provided and reflected figures of Service Tax and GST and also reflected the VAT turnover in the place of credit on account of WCT because under VAT provisions relating to Works contractors whenever the main-contractor (Respondent) gives work execution to a sub-contractor on back to back basis, then being such sub-contractor was paid the VAT on such back to back turnover, the main-contractor is entitled to take WCT credit in form of deduction of such back to back turnover from the taxable turnover of main-contractor. It was submitted that as per the master sheet of home buyers list the total area of both pre-GST and post-GST period's home buyer bookings are 1,71,575 Sft. and 4,63,165 Sft. res....
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....s made thereunder? b. Whether DGAP has calculated the profiteered amount by adopting appropriate methodology and has addressed various issues raised by Respondent during the proceedings? c. Whether Respondent is liable for penalty for its failure to pass on the commensurate benefit to its recipients? 7. The Authority finds that the DGAP has collected all relevant data and information including documents from the Respondent and have carried out in-depth investigation. After going through the DGAP's investigation report, its annexures & calculations, the Respondent's submissions and the other facts on record, the Authority observes that: - (i) The Respondent has contended that the total turn-over during the post-GST period was reflected as Rs. 1,83,96,55,636/- instead of Rs. 1,83,97,15,637/- and pending receivables of Rs. 17,14,83,699/- was ignored. In response to the same, the DGAP has clarified that during the course of investigation this data was not furnished by the Respondent. (ii) The Respondent has contended that as per section 15(5)(b) read with rule 3(2) of the Kamataka VAT Act, in respect of ....