TaxTMI 
TaxTMI 
2022 (8) TMI 1437
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....estigate the person case under rule 133 (4) of the CGST Rule, on the following issues:- a. The claim of the Respondent that he has passed on the ITC benefit amounting to Rs. 19,680/- to Applicant No. I and amounting to Rs. 1,54,87,120/- to the 769 other buyers, needs to be verified by obtaining acknowledgements from approximately 10% (78 buyers) of the buyers. b. It is also apparent from the record that the Respondent has claimed to have passed on TTC benefit amounting to Rs. 1,55,06,800/- on amount of profiteering for the period from July 2017 to June 2019, Therefore, he is also liable to pass on interest @18% on the profiteered amount to the flat buyers from the dated from which he has received the additional amount of consideration from them till the passing on of the ITC benefit, as he his used this amount in business as per the provisions of section 171(1) of the CGST Act, 2017 read with rule 133 (b) of the above Rules. The DGAP is directed to investigate, compute and ensure that the applicant interest is also paid to all eligible housebuyers. c. The difference in the turnover of the Respondent for the period from April 2016 t....
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....L. 3 (S.C.) = 2021 (378) E.L.T. 241 (S.C.) = [2021] 132 taxmann.com 123/168 SCL 784 II. In response to the DGAP letter dated 18-12-2020 and subsequent reminders dated 6-1-2021, 29-1-2021, 25-2-2021, 29-7-2021, 26-8-2021, 14-9-2021, 14-10-2021 and summons dated 9-3-2021, 23-3-2021 and 30-6-2021, the Respondent submitted his reply vide letters/e-mails dated 1-2-2021, 15-3-2021, 26-3-2021, 25-6-2021, 6-7-2021, 18-8-2021, 1-10-2021, 4-10-2021, 11-10-2021, 17-11-2021, 9-12-2021, 11-12-2021 and 13-12-2021. The reply of the Respondent is reproduced below. (a) He was executing multiple projects under the same Service Tax No. /Vat No. and the same GSTIN. The turnover declared is statutory returns includes the turnover of other projects as well, therefore there was a difference in turnover in pre and post-GST (b) He had passed on the credit of the ITC to the buyers in November 2018 and no interest was paid along with it. (c) He had applied for Occupation Certificate with the respective authority. (d) The project "Laxmi Apartments" under investigation is an Affordable Housing project, which was exempt fr....
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.... not liable to "Service Tax" and further the "Contractor" who was engaged by him was also not liable to pay any Service Tax. Thus, there was neither any "Output Tax Liability" nor any "Input Tax Credit" available to him. Post-GST the Respondent is collecting the GST (Output Tax) from the Customers and paying the GST (Input Tax) to the Suppliers (who were charging VAT) and GST (Input Tax) to Contractors (who were not charging any GST). Thus, the purposes of comparing the increase in ITC available to the Respondent could be done only with the items on which it was earlier getting ITC or charging tax. The Respondent stated that he would not get any benefit from the Input Tax paid to the Contractor. (ii) The alternate method to calculate the benefit to the Respondent post-GST. Respondent stated that he had passed on a 3% GST benefit to the Customers calculated on the payment due from the Customers after 1-7-2017 amounting to Rs. 1,59,35,584/-. The percentage had been estimated based on the expected benefit, the Respondent would receive on the reduction in the Cost of the Contractors post-GST. An approximate cost of 50% is incurred on the payments ....
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....submissions made by the Respondent, he had contended that he would not get any benefit from the Input Tax paid to the Contractors, and thus, the ITC Compartment method could give correct results only by excluding the ITC post-GST available to him. In this regard, it is observed that in the erstwhile tax régime (pre-GST), various taxes and cases were being levied by the Central Government and the State Governments, which got subsumed in the GST, Out of these taxes, the ITC (ITC) of some taxes was not allowed in the erstwhile tax regime. In the case of constraction 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 supplied, resulting in increased price. With the introduction of GST w.e.f. 1-7-2017, all these taxes got submitted in the GST and ITC of GST is available in respect of all goods and service unless specifically denied. Broadly, the additional benefit of ITC in the GST regime would be limited to cases input taxes, the credit of which was not allowed in the pre-GST regime but is allowed in the GST regime. Thi....
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...., 2004, which was in force at the material time. 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 October 2020, the details of the ITC availed by them. His turnover from the project "Laxmi Apartments" and the ratio of ITC to turnover, during the pre-GST (April 2016 to June 2017) and post-GST (July 2017 to October 2020) periods was furnished in table-A below. Table-A (Amounts in Rs.) Sl. No. Particulars Total April-16 to June 17 1-7-2017 to 24-l-2018 25-1-2018 to 31-10-2020 Total Post-GST 1 CENVAT credit of Service Tax Paid Input Services (A) - 2 Input Tax Credit of VAT paid on Inputs (B) 1,07,07,174 - 3 Input Tax Credit of GST Availed (C) 1,47,94,711,83 5,66,97,319.21 7,14,92,034,04 4 Total CENVAT Input Tax Credit Available D=(A+B+C) 1,07,07,174 1,47,94,714,83 5,66,97,310,21 7,14,92,03.00 5 Total Turnover as per homebuyers list (E) 50,46,00.900 24.42,31,671 45,62,27,065 70,04,58,73....
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....to 31-10-2020, when the effective GST rate was 8% for residential flats. Accordingly, based on the figures contained in table- A above, the comparative figures of the ratio of ITC availed/available to the turnover in pre-GST and post-GST periods us well as the turnover the recalibrated base price and the excess realization (profiteering) during the post-GST period was tabulated in table-B below; Table-B (Amount in Rs.) Sr. No. Particulars 1 Period A 1-7-2017 to 24-1-2018 25-1-2018 to 31-10-2020 Total 2 Output GST rate (%) B 12 8 - 3 The ratio of ITC to Turnover post-GST as per table (%) C 9 88 9 88 9.88 4 An increase in ITC availed post-GST (%) D=9.88% (less) 1.61% 8.27 8.27 8.27 5 Analysis of Increase in input tax credit: 6 Base Price raised from July 2017 to October 2020 (Rs.) E 24,42,31,671 45,61,27,065 70,04,58,736 7 GST raised over Basic Price (Rs.) F=E*B 2,93,07,801 1,64,98,165 6,58,05,966 8 Total Demand raised G=E+F 27,35,39,472 49,27,25,250 76,62,64,702 9 Recalibrated Basic Price H=E*(I=D) or 91.73% of E 22,4....
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....T regime Out of these 820 units, profiteering of Rs. 6,33,70,091/- had been computed in respect of 814 units only, and in respect of the remaining 6 units no profiteering could be computed as no demands were relied by the Respondent from these units in post-GST period. XIV. Further, in respect of the benefit of ITC passed on to homebuyers, the NAA vide the Interim Order directed the DGAP to obtain acknowledgements from 78 homebuyers selected randomly by the NAA In this regard it is observed that the 5 homebuyers had been repeated (4 repeated 2 times- (at Sr. Nos. 14-21,22-45, 27-77, 29-56) and I repeated 3 times (Sr. Nos.18-42-58) in the said list of 78 homebuyers Further, in respect of one homebuyers namely Sh. Pawan Kumar Yadav, no profiteering was computed by DGAP, have no confirmation was required. Furthermore, it is observed that in respect of one homebuyers Sh. Moolchand Bandal, unit No. 905 was braked by him on 15-4-2016 (pre-GST), and later on it was cancelled by him and the same unit was rebooked on 22-2-2020 by Sh. Anand Singh, therefore, no email was sent to the new home buyers. Hence, leaving these 8 (6 repeated homebuyers, one homebuyers in case of whom no pro....
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.... Other than Applicant 2 1,18,892 40,652 0 1,18,892 Buyers neither confirmed nor inform Respondent is required to pass on the notice amount Sub Total (Replied) H=1+4+5 l9 13,24,589 3,82,964 1,41,636 11,82,935 All buyers who replied or responded through emails/letters. 6 Other than Applicant 48 38,59,938 9,70,480 0 38,59,938 Mail sent to 42 buyers and reply received. Respondent reply in pass in the office amount 7 Other than Applicant 3 1,76,459 60,332 0 1,76,449 Letters were sent but no reply was received. Respondent reply in pass on the office amount Sub Total No. Replied) 111+6-7 51 40,36,387 10,30,812 0 40,36,387 Buyers to within standing Letters were sent but an reply received Sub Total (Mail/letters sent) IV-II+III 70 53,60,976 14,13,776 1,41,636 52,19,340 All the buyers to within email/letters were sent 8 Other than Applicant 1 1,55,710 1,20,800 0 1,55,710 Unit No. 903 was ex-booked in Feb 2020 by a new buyers. Hence in the basic buyers 9 Other than Applicant 1 58,391 45,300 0 58,391 No profiteering a....
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....n executing multiple projects other than "Laxmi Apartments" namely 'cohan residences. The Residences/Express Heights' and 'Mieaso' The turnover in the Statutory Returns Includes figures of him also, Respondent had provided figures of turnover in respect of project other than 'Laxmi apartments' and copies of GSTR-9 and a reconciliation of the same to substantiate his claim. The turnover depicted in the Statutory returns include the turnover of all the other project including Laxmi Apartments. (e) In respect of VAT Credit of Rs. 1,07,07,174/-, the Respondent had submitted the copies of Assessment Order under Haryana VAT Act, 2003, for 2016-17 and April 2017 to June 2017. As per these orders, the Respondent has been allowed ITC of VAT of Rs. 1,82,97,736/- and Rs. 46,85,002/- for 2016-17 and April 2017 to June 2017 respectively. Out of the total VAT Credit of Rs. 2,29,82,738/- for the pre-GST period from 1-4-2016 to 30-6-2017, the Respondent had claimed ITC of VAT of Rs. 1,07,07,174/- in respect of project "Laxmi Apartments. Because of the said Assessment Orders under Haryana VAT Act, 2003, it is submitted that the Respondent is eligible to claim ....
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....uction in the 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. 4. The above Report was carefully considered by this Authority and a Notice dated 15-3-2022, was issued to the Respondent to explain why the Report dated 13-12-2021, furnished by the DGAP 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 21-4-2022, wherein the Respondent had submitted the following points:- 1. BRIEF FACTS OF THE CASE 1.1 The company is in the business of construction of residential buildings and "Laxmi Apartments" (relevant to the present notice) is one of the real estate project being undertaken by the company. 1.2 "Laxmi Apartments" is an affordable housing project covered under the Affordable Housing Policy 2013, of the State of Haryana. 1.3 The said Affordable Housing Policy provides detailed guidelines on various aspects of projects including but not limited to; ....
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....;Comparing the incomparable i.e. ITC of Pre and Post-GST. (e) Using the same figures and mechanism of Part 1 of the Project (Tower-1 to 9) and Part 2 of the Project (Tower-10) 3.1 Meaning of the term profiteering in terms of Sec 171 of the GST Act The DGAP had misunderstood the entire concept of profiteering. To discuss the same, it is necessary to understand the following: 3.3.1 In the given case there is no reduction in the rate of tax of output tax rather after the implementation of GST the rate of tax had increased to 8%. 3.1.2 The DGAP had failed to appreciate the meaning of "profiteering" in the context of sec 171 of the GST Act and had blindly taken the entire amount of ITC as "benefit of input tax credit" and had used the same for calculation of profiteered amount. Therefore, the report of DGAP cannot be accepted as it is not in line with the expectations of sec 171 of the GST Act, read with rule 126 of the GST rule. 3.2 Using the methodology of ITC to turnover 3.2.1 The project under consideration in the instant was commenced on 22nd March 2016 of which Occupation Certificate (completion certificate....
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....r July 2021. Just because the booking amount of Tower-10 was received the same could not be made part of the issue under consideration. This inclusion also reflects the non-considerate approach of the DGAP including not understanding of the facts of the case. 3.6 Profiteered Amount According To The Company The project "Laxmi Apartments" is divided in two parts Part I of the project which consists of "Tower 10". The Part 1 of the project was completed on 9th July, 2021 i.e. the date when occupation certificate was received whereas construction of Part 2 of the Project commenced after July, 2021. The company had therefore analyzed the two parts of the project independently. 3.7 Further, the company after introduction of GST had passed on the benefit of GST by waiving of the contract price in the following manners to its customers: Sl. No. Particulars Benefit passed on 1 Flats booked up to 31st March, 2019 3% of the Total demand to be raised after 1st July, 2017. 2 Flats booked up to 1st April, 2019 6.18% of the Total demand to be raised The summary of benefit passed on or to be passed on at the time of issuance of demand ....
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....TC. However, post-GST the sub-contractors were liable to charge GST from the company and the company was getting credit for the same, The said credit is not a benefit to the company rather is only a tax natural transaction where the company first pays tax and then gets it back as ITC Cement & Steel 24902737.18 Prior to implementation of GST the company was getting ITC of cement and steel and even after implementation of GST the company is getting the ITC so as already understood in such cases there is no "benefit of input tax credit" as the amount paid is allowed as credit thereby making it tax neutral or cost neutral but at no point there is any additional gain to the company Other Goods 3153157.58 3.12 Further, for the category "Other services", the company is getting "benefit of Input Tax Credit" which is effectively Rs. 37,32,805/-. Therefore, the total benefit arising to the company on account of the profiteered amount in accordance with the provisions of sec 171 of the GST Act is only Rs. 37,32,805/- 3.13 The total benefit passed on by the company was Rs. 2,06,88,785/-. The company had already passed on more benefit than the profiteered amount....
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....ceipt of booking amount. 5. Copy of the above submissions dated 21-4-2022, filed by the respondent were supplied to the DGAP for supplementary Report under rule 133(2A) of the CGST Rules, 2017. The DGAP filed his clarification on the Respondent's submissions vide their supplementary Report dated 12-5-2022, wherein they had clarified that:- i. The Respondent had contested that the DGAP had failed to appreciate the meaning of "profiteering" in the context of section 171 of the CGST Act and had blindly taken the entire amount of ITC as "benefit of input tax credit" and had used the same for calculations of profiteered amount. In this regard it is submitted that Respondent had failed to appreciate that the DGAP had taken the input tax credits availed/available in pre-GST regimes and after comparing these amounts, the additional benefit of ITC available in post-GST regime had been considered for computation of profiteering section 171(1) of the CGST Act, 2017 is very clear which states that any reduction in the rate of tax or the benefit of ITC had to be passed on to the recipient by the way of commensurate reducation in price. The additional benefit of the I....
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....us, the turnover considered for the computation of the profiteering pertains to the sold unit only in the project. Whereas the total ITC availed pertains to the entire project of the Noticee. The ratio of the ITC to the taxable turnover is computed to being in picture the buyers from whom demands were raised or advance were received by the Respondent so that the additional benefit of ITC attributed to buyers could be commensurately passed on to such eligible buyers. Therefore to determine the actual ITC attributable to the sold units, the proportionate turnover, Hence, the methodology On the basis of ratio of ITC to the turnover of pre-GST regime with post-GST adopted by the DGAP is correct and justifiable under the above provisions of Section 171. iii. The Respondent had raised objection over the time periods taken in the pre-and post-GST. In this regard, it is to submitted that the period of investigation had neither been prescribed in the Central Goods and Services Tax Act, 2017 nor in the corresponding Rules/Notifications. However, it is clarified that the Input Tax Credit in pre-GST (1-4-2016 to 30-6-2017) and post-GST (1-7-2017 to 30-6-2019) periods were not co....
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....h the area sold in respective periods. Therefore, the periods taken in pre-and post-GST were justifiable and were within the confines of the law. iv. The Respondent has alleged that DGAP has used wrong rate of tax in the calculation of profiteered amount. The averment made by the Respondent is factually incorrect. In this regard it is submitted that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/34 abatement for land value) on construction service, vide Notification No. 11/2017 Central Tax (Rate), dated 28-6-2017. The effective GST rate on construction service in respect of affordable and low-cost homes up to a carpet area of 60 square meters per house was further reduced from 12% to 8% vide Notification No. 1/2018 Central Tax (Rate), dated 25-1-2018. Therefore, since the Respondent's impugned project is covered under affordable housing scheme, the rate of GST had been considered as 12% and 8% for the periods from 1-7-2017 to 24-1-2018 and from 25-1-2018 to 31-10-2020 respectively which is correct. v. The Respondent has also alleged that DGAP has been compiling the incompara....
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.... adopted by the Respondent in this regard cannot be accepted as it is not based on correct interpretation of the above provisions of section 171. However, cost of materials mentioned by the Respondent does not give an exact quantum of additional ITC benefit. The increase or decrease in costing/pricing had got nothing to do with the increase/decrease in rate of tax and availability of ITC. These financial and commercial considerations and other issues such as inflation were already accounted for by the Respondent while launching a project and his lack of wisdom can't come at the cost of benefit of ITC that is additionally accruing to the customers on account of GST. The ITC to Turnover ratio comparison is more relevant method to arrive at the correct profiteered amount. It is also submitted that the cost of material in the subject case is immaterial as the Respondent had to just pass on the ITC benefit which had accrued to him un account of additional ITC to the customers in the post-GST period as compared to the pre-GST period. Accordingly, the DGAP had rightly considered the ITC to turnover details to arrive at the profiteered amount in the present case. Further, it is also su....
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....r investigation in this case, the Respondent was asked for completion certificate of the project However, the Respondent submitted before the DGAP that he had applied for the same. The Respondent submitted various documents/information during further investigation in the case and his last reply submitted before the DGAP was on 17-11-2021. If the Respondent had already received the competition certificate in July, 2021, then same was not informed/submitted before the DGAP. Hence, it appears that these facts were suppressed by the Respondent before DGAP and he did not contest the same before DGAP during investigation. However, the Respondent is now claiming the same before NAA Therefore, the claim of the Respondent is not tenable. The Respondent had prayed before the NAA that the report of DGAP should not be considered and the profiteered amount calculated in the said report should be rejected. However, it is submitted that for the reasons mentioned above, the Respondent is not entitled to the relief he had claimed and hence, in view of the above submissions. it is requested that the present investigation report might be considered as fair and correct. vii. Th....
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....but allowed in the GST regime. This additional benefit of ITC in the GST regime is required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of section 171 of GST Act, 2017. Therefore, on implementation of GST, the subcontractors also benefitted with the additional ITC and in terms of section 171 of the CGST Act, 2017, the benefit of additional ITC is required to be passed on by every supplier of goods/service in the supply chain. Hence, due to availability of additional benefit of ITC to the subcontractor, the subcontractors were also required to pass on the benefit of ITC on the Respondent in terms of section 171 of the CGST Act, 2017. However, it is a matter of fact that the Respondent renegotiated with his subcontractors and got reduction of 7% in the Contractors Bills Post-GST. This claim was made by the Respondent himself before DGAP during the further investigation of this case. Therefore, it is amply clear that the Respondent had received benefit of ITC from his subcontractors and now claiming that he had not been benefited asserting same as tax neutral transactions. x. With regard to Respondent's aver....
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....egards to contention of the Respondent regarding passing on the benefit with respect to Tower 10 it is to submit that during the course of further investigation of the case, the Respondent did not make such submissions before the DGAP that he had passed on the benefit of ITC to the buyers of Part 2 i.e. Tower 10 of the project. Moreover, now also the Respondent failed to produce any documentary evidence, in support of his claim the benefit @9.84% had been passed on by him to the buyers of Tower 10 of the project. However, it is partinent to mention here that the Respondent is contesting that there was no benefit accrued to him as far as Part 2 i.e. Tower 10 of the project is concerned as the construction of the same commenced after July, 2021. Simultaneously, the Respondent is also claiming that he had passed on the benefit of ITC @6.57% which is very huge as compared to the rate of GST i.e. @ 8%, Both these contentions were contradictory to each other. 6. On the basis of above clarification filed by the DGAP, the Respondent vide his letter dated 25-5-2022, had filed his reply and identified the following disputed issue. Dispute 1; The Project Laxmi Apartment h....
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.... c. Darshan Joshi v. Lodha Developers Ltd. Though, the anti-profiteering provisions did not apply to the company it had itself reduced the price of the flats by 6.84% of the Total amount received and receivable from the buyers. Dispute 2; Considering the entire amount of ITC as benefit of ITC DGAP had failed to distinguish between the two terms ITC and Benefit of Input Tax Credit In this regard it is reiterated that, the objective of sec. 171 is to identify the benefit of ITC and not use a short-cut of using the entire ITC, therefore the ideal working would have been to classify the input tax credits availed by the company in the following categories: Category Remarks ITC available PRE-GST and POST-GST No benefit of ITC therefore the value should be ignored ITC nor available PRE-GST but available POST-GST Qualifies as benefits of ITC and therefore commersunate reduction in Prices is required ITC not applicable (no tax was applicable earlier) in PRE-GST period but ITC is available POST -GST No benefit of ITC as there was no tax cost before implementation of GST which is now available as ITC Co. is paying the....
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....people who had booked the flat. d. Further, since the project is an affordable housing project the installing get due on the basis of no of days and is not linked with even the construction of the project therefore even there is no construction in a period the outward supply might be there and there could be situation wherein there is no outward supply but there is huge flow of inward supply- Further, the Notification No. 3/2019 Central Tax Rate dated 26th March, 2019, which had stipulated percentage completion method for calculation of ITC allowance during the change in tax rate structure real estate projects. This was again required since the inward supplies and outward supplies in a particular tax period do not match with one another. Furthermore, since the inward supplies and outward supplies of one period in real estate project was not co-related departments and institutions had laid down mechanism for the same, to illustrate a few. a. Ministry of Corporate Affairs lad As 115 Revenue Recognition by Real Estate Companies and AS 7 Construction Contracts b. Income Tax: ICDS III Construction Contracts c. ....
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....alculate the benefit rather a flimsy method lacking in all parameters had been used to calculate the profit amount. The Respondent had submitted that the Authority had similar view in the case of Sumit Marsinghka v. E-Homes Infrastructure (P.) Ltd.. Dispute 6; Amount of Benefit passed by the company The company had stated that the total benefit that would be passed on by it for the entire project is Rs. 2.44 cr i.e. for both the parts and the relevant period would he from 1st July, 2017 to 31st Oct, 2020 and therefore the two values would not match. The company at various places had categorically specified that he was submitted values for the entire project since Part 1 of the project is completed and the second part of the project is outside the purview of sec 171 but for the DGAP these were irrelevant facts and required on consideration. As regards the evidence, the company stated that this is an affordable housing scheme where the price of flats is fixed by the State Government with no discretion of the builder, however, Post-implememation of GST after getting the understanding of various issue the company itself decided to refuse the price of....
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....t same, the submission of company is contradictory. The DGAP could not realize had the company accepted the entire ITC as benefit of ITC then there was no need for the submission since the company is of the firm belief that sec. 171 does not talk about entire ITC and but only benefit of ITC therefore the two figures could not be same. The DGAP had failed to appreciate that company had wilfully come forward to calculate the profiteered amount for the entire period of the project and not restrict it to Oct, 2020. Further, the company had accepted wherever the entire tax was earlier becoming cost but was eligible as credit in GST (Other services) and classified it as benefit of input tax credit. The company had also considered the benefit of cost reduction in case of works contractor and cement & steel which is the benefit due to implementation of GST and not benefit of ITC. However, the DGAP had not given any specific reasons as to why the said methodology is not in line with sec. 171. The DGAP had only referred that the working should had undertaken with entire ITC and not the benefit which is grossly incorrect. The company requested to consider the amount passed o....
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....ase the project was started in the post-GST regime and therefore, the DGAP submitted Nil report which was upheld by the NAA on the grounds mentioned in Para 21 of the aforesaid order wherein the NAA observed that on the basis of the sequence of the above events it could safely concluded that the above project had been stted after coming into force of GST w.e.f. 1-7-2017 and further observed that since there is no basis for comparison of ITC available before and after 1-7-2017, the Respondent was not required to recalibrate the prices of flat due to availability of additional benefit of ITC. Hence, it is amply clear that in this case, since the entire project was launched in post-GST regime, the fact and circumstances of the Respondent's project was completely different from this case and hence same is not applicable to the Respondent's project. b. Director General of Anti-profiteering, CBDTS & Customs v. Alton Buildtech India (P.) Ltd. [2022] 137 taxmann.com 300 (NAA) In this case, an investigation report was submitted by the DGAP against the Respondent in respect of 'Angan' and videShashank Thakar v. Alton Buildtech India (P.) Ltd. [2020] 121 taxm....
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.... case and hence the hence the claim of the Respondent is not tenable. Moreover, it is pertinent to mention here that Tower-10 of the project 'Laxmi Apartment's of the Respondent is located in the same premises of the project for which no separate accounting of ITC is maintained by the Noticee. Therefore the inputs and inputs services intended/meant for Tower 1 to Tower 9 could be used for Tower 10 and also the ITC available in respect of Tower 10 only might have been availed at the time of discharging his tax liability i.r.o. of Tower 1 to Tower 9 or vice versa, Therefore, investigation carried out by the DGAP considering Tower 10 also is correct and quite justifiable and hence same is within the confines of law and practice followed. Furthermore, it is pertinent to mention here that the Respondent is contesting that since the Tower-10 was launched in post-GST regime, the profiteering provisions were not applicable to Tower-10 whereas in the homebuyers list submitted by the Respondent the Respondent had claimed that the benefit of ITC had been passed on to the buyers of Tower 10 also. Therefore the contention of the Respondent is not correct and hence not ....
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....ere liable to pay GST. Now if the contention of the Respondent is correct, then same is applicable in case of his subcontractor also. However, it is a matter of fact that the Respondent renegotiated with his subcontractors and got reduction of 7% in the Constructors Bills post-GST. Therefore, in the similar situation (category 3 of the table), the Respondent is availing benefit of ITC from his subcontractors but in his own case, the Respondent is claiming that he is paying tax and thereafter taking credit and asserting same as tax neutral transaction. In fact, the GST paid on output is being borne by the homebuyers only. GST paid on inputs is being taken as ITC of GST. It appears that the Respondent is taking the benefit of ITC from all possible of ITC of GST to his customers/recipients. Dispute 3: Methodology adopted by DGAP of comparing ITC to Total Turnover The contention of the Respondent is not tenable as explained earlier, Further, the Respondent had contended that outward and inward supplies of real estate project was not co-related and to substantiate his claim the Respondent had relied upon his own project's fact that of cut of 804 units, mere 5 units....
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....ntirety. In the regard it is submitted that primarily, Sl. No. 3(v)(d) of the said Notification No. 20/2017, dated 22-8-2017 is not at all applicable to the Noticee. The said Sl. No. 3(v)(d) is applicable to the "Composite supply of works contract as defined in clause (119) of section 2 of the CGST Act, 2017". The Respondent is supplying "Construction Service" to his recipients/homebuyers and is not supplying the "Works Contract Service". Therefore, the said Notification is applicable to the Respondent's subcontractors only who were supplying "Works Contract Service" to the Respondent as defined in clause (119) of section 2 of the CGST Act, 2017. Further, the applicable tax rate specified against the Sl. No. 3(v)(d) under column (4) of the table of the aforesaid Notification is 6% which is for the Central GST and similarly it is 6% for State GST as specified in similar Notification issued by the State Government (Haryana). Therefore, the effective rate of GST on the services mentioned at Sl No.3 (v)(d) of the Notification is 12% Further, it is pertinent to mention here that the provisions of Paragraph 2 of Notification No.11/2017-Central Tax (Rate), dated 28-6-2017 sha....
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.... the ITC available to him in respect of Part of the project i.e., Tower 9, which pertains to the period from 1-7-2017 to 31-7-2021 whereas the DGAP had considered the period from 1-7-2017 to 31-10-2020 and therefore the amount of ITC in DGAP's report is less than the amount of ITC claimed by the Respondent. In this context, it is pertinent to mention here that vide DGAP's Investigation Report, it was reported that the Respondent had not received Occupation Certificate and therefore profiteering, if any for the period post-October, 2020 was not examined as the exact quantum of ITC than would be available to the Respondent in future could not be determined at that stage, when the construction of the project was not completed. Accordingly, it was recommended in the report that in respect of the units/homebuyers in whose case agreement had been made prior to the receipt of Occupancy Certificate and where balance amount is yet to be demanded, the NAA might direct the Respondent to work out the element of profiteering on similar lines as discussed/calculated above and to pass on the benefit of ITC to the respective homebuyers. Now, since the Respondent had claimed more I....
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....ful consideration of the all DGAP Reports and all of the Respondent's submissions finds as under :- I The Respondent has claimed that project Laxmi Apartments had two separate parts i.e. Tower 1 to 9 being the First Part and Tower 10 being the Second Part. The Authority finds that the project was launched in pre-GST regime and the Respondent had obtained single RERA registration for the entire project. Since for the both the parts i.e., Tower 1 to Tower 9 and Twer-10 there was single RERA registration the second part i.e., Tower-10 cannot be spared from the current investigation on the mere basis that the construction of same commenced in July, 2021. Section 171(1) of the CGST Act, 2017 is very clear which states that any reduction in the rate of tax or the benefit of ITC had been passed on to the recipient by way of commensurate reduction in price. Therefore, the benefit of ITC is to be passed on to each recipient or to each flat buyers of the project. Therefore, the scope of investigation covers all other recipients in that project, besides the Applicant Hence, the contention of the Respondent in the regard is not tenable and the investigation has been....
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....ar that since the Phase II of the Project Angan was launched in post-GST regime for which the Respondent obtained separate RERA Registration Certificate in post-GST regime, the fact and circumstances of the Respondent's project was completely different from this case and hence the same is also not applicable in the case of Respondent's project. e. Darshan Joshi (supra). In this case also, during investigation it was observed that the entire project 'Lodha Primo' was launched in post-GST Regime for which RERA Registration Certificate was also obtained by the Respondent in post-GST regime Accordingly a Nil profiteering Report was submitted by the DGAP against the Respondent which was upheld by the NAA on the grounds mentioned in Para 15 of the aforesaid order and therefore vide Para 17 of the Order, the NAA agreed with the findings of the DGAP. Hence, in this case also since the project was launched in post-GST regime for which the Respondent obtained the RERA Registration Certificate in post-GST regime only this case is not applicable to the Respondent's project as Tower-10 of the Respondent's project had no separate RERA Regi....
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.... profiteering pertains to the sold units only in the project whereas the total ITC availed pertains to the entire project to the entire project. The ratio of the ITC to the taxable turnover is computed to bring in picture the buyers from whom demands were raised or advance were received by the Respondent so that the additional benefit of ITC attributed to buyers could be commensurately passed on to such eligible buyers. Therefore, to determine the actual ITC attributable to the sold units, the proportionate turnover is considered. Hence, the methodology on the basis of ratio of ITC to the turnover of pre-GST regime with post-GST, adopted by the DGAP is correct and just triable under the above provisions of section 171 of the CGST Act, 2017 and the methodology bas been approved by this Authority in other similar cases. IV. The Respondent has contended DGAP has been comparing the incomparable. The Respondent claimed that comparing ITC, of two periods cannot be the manner to identify the benefits of ITC, The Authority finds that, the ITC to Turnover ratio comparison is more relevant method to arrive at the correct profiteered amount. The cost of material in the subject ....
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....on the benefit of reduction in the rule of tax and the second pertaining to the passing on the benefit of ITC On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post-GST period, hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP's Report 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 1.61% and during the post-GST period (July-2017 to October-2020), it was 9.88% for the project "Laxmi Apartment's". This confirm that, post-GST the Respondent has been benefited from additional ITC to the tune of 8.27% [9.88% (-) 1.61%] of his turnover for the said project and the same was required to be passed on to the customer/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to the customers/flat buyers/recipients as Rs. 6,33,70,091/- (which includes an amount of Rs. 57,557/- in relation to Applicant No 1) for the project "Laxmi Apartment", the details of whi....
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....to ensure compliance of 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 cach homebuyer/recipient/customer, if not already passed on. In this regard an advertisement may also be published in a minimum of two local Newspaper/vernacular press in Hindi/English/local language with the details i.e. Name of the builder (Respondent) M/s Parcena Infrastructure Pvt. Ltd., Project "Laxmi Apartment" Location Gurugram. Haryana and amount of profiteering Rs. 6,33,70,091/- so that the Applicant along with Non-Applicants Homebuyer/recipients/customers can claim the benefit of ITC which has not been passed on to them. Homebuyer/recipients/customers only also be that this detailed NAA Order is available on Authority's website www.nna.gov.in. Contact details of concerned jurisdictional Commissioner CGST/SGST for compliance of this Authority's order may also be advertised through the said advertisement. 16. Further, this Authority as per rule 136 of the CGST Rules 2017 directs the concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding the complian....