TaxTMI 
TaxTMI 
2020 (11) TMI 1136
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.... in Respondent's project "Siddha Sky" located in Kolkata. Applicant No. 1 has alleged that the Respondent had not passed on the benefit of input tax credit (ITC) by way of commensurate reduction in prices despite having charged GST @12% on the payments made by him to the Respondent. The Applicant Noy 1 also submitted that on having raised the said issue with the Respondent, he has received the following reply vide email dated 11.01.2018 from the Respondent which read as follows- "As per the provisions of the GST Act in which the purchasers are entitled to receive benefit of lower prices on account any reduction in rate of tax on any supply of goods or services and benefit of Input Tах Credit, as put in place in the said Act. You will however appreciate that the said GST Act which came in force only on 01.07.2017 is in its nascent stage. There is no clarity with regard to the manner in which the benefit of input tax credit and any reduction of tax rate, shall be quantified. In the above circumstances, it is difficult for us to precisely estimate the benefit which we have to transfer to our buyers at this stage. We are in the process of working out the cost b....
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....arious letters/ e-mails but he did not furnish the complete records/ information and relevant documents which were required for investigation. Hence, Summons under Section 70 of the Central Goods and Services Tax Act, 2017 read with Rule 132 of the Rules, were issued to Sh. Sanjay Jain, Designated Partner of the Respondent, asking him to appear before the DGAP on 14.11.2019. In response to the abovementioned Summons, the representatives authorized by the Respondent, Ms. Sonia Dube, Advocate and Ms. Surbhi Anand, Advocate appeared before the DGAP on behalf of Sh. Sanjay Jain on 14.11.2019 and requested the DGAP for 10 days to submit the requisite records/ documents. Thereafter, the Respondent submitted his response to the above said Notice and Summons vide his various letters and emails and furnished the following documents/ information before the DGAP:- a) Copies of GSTR-1 returns for the period from July 2017 to June 2019. b) Copies of GSTR-3B returns for the period from July 2017 to June 2019. c) Copies of ST-3 returns for the period from April 2016 to June 2017. d) A submission that as per the West Bengal Value Added Tax Rules, 2003, VAT laws ....
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....visions of Section 171 of the Central Goods and Services Tax Act, 2017. g) That there were some homebuyers from whom he had received advances but their units were not yet allotted and that their case should be treated as falling outside the scope of Section 171 of the Central Goods and Services Tax Act, 2017; that certain customers from whom he had received advances were in the process of cancellation of their bookings/ units. h) That he had executed an Agreement dated 15th September 2016 with the landowners that provided for revenue-sharing between him and the landowners; that since the unite belonged to him, he had availed the entire CENVAT credit/ ITC in respect of all the units. i) that for calculating the share of revenue between the landowners and him, the following basis had been agreed between them vide their aforementioned Agreement:- i. That no units/area was to be allocated to the landowners, who were entitled to the revenue arising out of the first 36,610 sq. ft. sold in the project. ii. That he was entitled to revenue arising out of the 42,995 sq. ft. which would be sold after the sale of the share of the landowners. ....
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.....2016 10.00% 15,15,000 95,950 1,50,000 89,319 18,50,269 4 Completion of Ground Floor Slab 07.11.2017 5.00% 7,57,500 47,975 75,000 1,05,657 9,86,132 5 Completion of 3rd Floor Slab 23.01.2018 5.00% 7,53,427 47,975 75,000 - 1,05,168 9,81,570 6 Completion of 6th Floor Slab 20.04.2018 5.00% 7,57,500 47,975 75,000 - 1,05,657 9,86,132 7 Completion of 9th Floor Slab 21.06.2018 5.00% 7,57,500 47,975 75,000 1,05,657 9,86,132 8 Completion of 12th Floor Slab 16.09.2018 5.00% 7,57,500 47,975 75,000 - 1,05,657 9,86,132 9 Completion of 15th Floor Slab 27.10.2018 5.00% 7,57,500 47,975 75,000 1,05,657 9,86,132 10 Completion of 18th Floor Slab 16.01.2019 5.00% 7,57,500 47,975 75,000 - 1,05,657 9,86,132 11 Completion of 21st Floor Slab 27.02.2019 5.00% 7,57,500 47,975 75,000 1,05,657 9,86,132 12 Completion of 24th Floor Slab 15.04.2019 5.00% 7,57,500 47,975 75,000 &nbs....
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....ices or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies", Section 17 (3) "The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule i, sale of building'. Therefore, the DGAP has stated that the ITC availed in respect of the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling prices of such units to be sold to the prospective buyers by taking into account the net benefit of additional input tax credit available to him post-GST. 11. The DGAP has reported that before 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail the credi....
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....om additional input tax credit by 2.45% [3.25% (-) 0.80%] of the turnover. Accordingly, the profiteering had 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 June 2019) when the effective GST rate was 12% (GST @18% along with 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017- Central Tax (Rate), dated 28.06.2017. Accordingly, based on the figures contained in Table- 'B' above, the comparative figures of the ratio of input tax credit availed/available to the turnover 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 were tabulated by the DGAP as given in Table-'C' below:- Table-C (Amount in Rs.) S. No. Particulars Post- GST 1 Period A After 01.07.2017 2 Output GST Rate (%) B 12.00 3 The ratio of CENVAT credit/ Input Tax Credit to Total Turnover as per table - 'B' above (%) C 3.25 4 Increase in input tax credit availed pos....
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....the input tax credit in respect of these 46 units was considered to calculate profiteering in respect of /116 units where payments had been received after GST, the computation would have become erroneous. Therefore, the benefit of the input tax credit in respect of these 46 units should be calculated when the consideration was received from such units by taking into account the proportionate input tax credit in respect of such units. 16. The DGAP has concluded that the benefit of additional input tax credit to the tune of 2.45% of the turnover has accrued to the Respondent post-GST and the same was required to be passed on by the Respondent to the Applicant No.1 and other recipients. Section 171 of the Central Goods and Services Tax Act, 2017 appeared to have been contravened by the Respondent, in as much as the additional benefit of input tax credit @2.45% of the base price received by the Respondent during the period from 01.07.2017 to 30.06.2019, had not been passed on by the Respondent to the Applicant No. 1 and other recipients. On this account, the Respondent had realized an additional amount to the tune of Rs. 2,41,603/- from Applicant No. 1 which included both the profit....
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.... of Units booked in the pre-GST regime i.e. booked units as on 30.06.20171 92 B. Number of Units booked in the relevant post-GST period i.e. between 01.07.2017 to 30.06.2019 70 C. Number of Units booked as on 30.06.2019 162 c). That the details of the turnover of the said project in the two periods were as below:- Particulars for Siddha Sky Pre-GST Regime GST Regime 01.04.2016 to 30.06.2017 01.07.2017 to 30.06.2019 Turnover from the units booked in earlier regime i.e. booked units as on 30.06.2017 55,53,30,915 18,88,06,700 Turnover from the Units booked in GST regime i.e. between 01.07.2017 to 30.06.2019 1,89,83,290 49,79,32,607 Advances in respect of the un- allotted units and units in the process of cancellation 50,00,000 - Turnover pertaining to cancelled units 52,939,667 97,20,732 Total 63,22,53,872 69,64,60,039 As per ST-3/ GSTR-3B 63,22,53,872 69,64,60,039 19. Further, the Respondent has made the following submissions before this Authority- a) that the supplies provided solely in the GST regime were not covered by the anti-profiteering provisions. ....
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....td Order No. 49/2019 and M/s. Fusion Buildtech Pvt. Ltd Order No. 71/2019 in support of his contention; that accordingly, an amount of INR 34,53,904/- needed to be excluded from the total profiteering computed by the DGAP as has been explained in the Table below:- A Turnover for units booked in earlier regime i.e. booked units as on 30.06.2017 Rs. 18,88,06,700 B Value of Land (1/3rd) Rs. 6,29,35,567 C Anti-profiteering % computed by Ld. DG 2.45% D Additional GST also alleged to be collected from customers 12% E Amount of profiteering computed by Ld. DG for the units booked in GST regime [(A-B)*C*(1+D)] Rs. 34,53,904/- f) That the CGST Act 2017 and the CGST Rules 2017, both, did not provide the procedure and mechanism for calculation of profiteering and hence the methodology adopted by the DGAP was thus arbitrary and violative of the principles of natural justice. g) That the investigation could not have gone beyond the application filed by Applicant No.1 in terms of Rule 126 and Rule 128 of the CGST Rules 2017 h) That this Authority could not suo-moto assume jurisdiction in respect of the other homebuyers....
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....e. the value of land and the value of construction. Further, the DGAP in his Report dated 19.03.2020 has considered GST @ 12% (after abatement for land). Therefore, the claim of the Respondent was not acceptable. v. In response to the contention of the Respondent that procedure and mechanism for calculation of profiteering has not been specified, the DGAP has stated that the "'Methodology and Procedure" has been notified by this Authority vide its Notification dated 28.03.2018 under Rule 126 of the CGST Rules, 2017. The main contours of the 'Procedure and Methodology' for passing on the benefits of reduction in the rate of tax and the benefit of ITC are enshrined in Section 171 (1) of the CGST Act, 2017 itself which 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 is clear from the perusal of the above provision that it mentions 'reduction in the rate of tax on any supply of goods or services" which does not mean that the reduction in the rate of tax is to be taken at the level of an entity/group/company for the entire supplies ....
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....ilar to another project. Issuance of Occupancy Certificate/ Completion Certificate would also affect the amount of benefit of ITC as no such benefit would be available once the above certificates were issued. Therefore, no set parameters could be fixed for determining methodology to compute the benefit of additional ITC which would be required to be passed on to the buyers of such units. DGAP has added that the facts of the cases relating to the Fast Moving Consumer Goods (FMCGs), restaurants, construction, and cinema houses, were completely different and therefore, the mathematical methodology employed in the case of one sector could not be applied in the other sector otherwise it would result in denial of the benefit to the eligible recipients. Further, applying the same mathematical methodology of the FMCG sector to a supplier of a cinema sector will lead to erosion of justice in the name of uniformity. DGAP has also added that in light of the above facts, the quantum of profiteering has been computed by the DGAP correctly by taking into account the particular facts of each case. It is pertinent that there cannot be a one-size-fits-all mathematical methodology for computation of....
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....GST @ 12% (after abatement of land value) has been added was not valid as the profiteering has been computed by DGAP on the entire value raised from customers, which included the value of land and consequently, after computation of the quantum of profiteering sans the tax element, DGAP has incorporated GST @12%. The manner of calculation and the submissions made by the DGAP indicated that DGAP has computed profiteering on the value of land also. 22. We have carefully considered all the submissions filed by the Applicants, the Respondent, and the other material placed on record. We find that Applicant No. 1, vide his complaint, has alleged that the Respondent was not passing on the benefit of ITC to him even though he was availing ITC on the purchase of the inputs at the higher rates of GST which had resulted in the benefit of ITC to him and that the Respondent was also charging GST from him @12%. These complaints were examined by the Standing Committee and forwarded to the DGAP on 28.06.2019 for investigation. The DGAP, vide his Report dated 19.03.2019 has found that the ITC as a percentage of the total turnover which was available to the Respondent during the pre-GST period was....