2022 (5) TMI 1594 - NAPA - GST

Profiteering - purchase of a flat in the Respondent's project Samyama City Tower 1-D - Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the prices - contravention of section 171 of the CGST Act, 2017 - HELD THAT - RERA approval of the project Samyama City Tower 1-D was given for the period 8-1-2018 to 31-3-2023, that all bookings and fixation of price have been made after GST was introduced and that all payments have been received after 1-7-2017; as such in the given facts and circumstances, the Authority finds that no case of profiteering under section 171(1) of the CGST Act, 2017 can be made out against the Respondent in respect of Samyama City Tower 1-D . However, the Authority finds that the Respondent is also executing other nine projects and the issue of profiteering has not been examined by the DGAP in respect of them. In view of the observation made in the earlier paragraph, the Authority finds that there exists reason to investigate other nine projects for the purpose of determination of profiteering. Accordingly, this Authority as per the provisions of Section 171(2) of the above Act take suo motu cognizance of the same and in terms of Rule 133(5) of the said Rules, directs the DGAP to conduct investigation in respect of the other nine projects and submit Report to this Authority for determination whether the Respondent is liable to pass on the benefit of ITC in respect of the other 9 projects/towers as mentioned in Table-B' of the DGAP's Report to the buyers or not as per the provisions of Section 171 (1) of the above Act. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.

Summary

Issues Involved:
1. Whether there was a benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent after the implementation of GST.
2. Whether the Respondent passed on such benefit to the recipients by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Whether there was a benefit of reduction in the rate of tax or ITC on the supply of construction service by the Respondent after the implementation of GST:

The Applicant No. 1 alleged that the Respondent did not pass on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in prices for a flat purchased in the Respondent's project "Samyama City Tower 1-D." The DGAP conducted a detailed investigation and reported that the project "Samyama City Tower 1-D" was launched post-GST implementation, with the first booking made on 19-1-2018. The DGAP noted that there was no pre-GST tax rate or ITC structure available for comparison with the post-GST scenario. The effective rate of tax pre-GST was lower than the post-GST rates, but since the project was launched after GST implementation, no pre-GST data was available for comparison.

2. Whether the Respondent passed on such benefit to the recipients by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017:

The DGAP's investigation revealed that all bookings and payments for the project were made post-GST implementation. The Respondent provided evidence that the project started in January 2018, and the Maharashtra Real Estate Regulatory Authority (MahaRERA) approved the project for the period from 8-1-2018 to 31-1-2023. Since there was no pre-GST tax rate or ITC structure for comparison, the DGAP concluded that Section 171 (1) of the CGST Act, 2017, was not applicable in this case. The Authority agreed with the DGAP's findings, noting that the anti-profiteering provisions were not applicable to the project under investigation as it was launched post-GST.

Additional Observations:

The Authority noted that the Respondent had ten separate RERA registrations for different projects but maintained a single GST registration and a common ITC register for all projects. The Respondent was executing all projects from a common pool of ITC, which raised concerns about whether the benefit of ITC was passed on to buyers of other projects. The Authority directed the DGAP to investigate the other nine projects to determine if the Respondent passed on the ITC benefits as per Section 171 (1) of the CGST Act, 2017.

Conclusion:

The Authority concluded that no case of profiteering under Section 171 (1) of the CGST Act, 2017, could be made against the Respondent for the project "Samyama City Tower 1-D." However, the DGAP was directed to investigate the other nine projects to ensure compliance with anti-profiteering provisions. The Respondent was instructed to cooperate with the DGAP and provide necessary documents and information during the investigation.