2019 (5) TMI 1395 - NAPA - GST

Profiteering - purchase of a flat - benefit of Input Tax Credit (ITC) had not been passed on - increased benefit of ITC or not - contravention of provisions of section 171 of CGST Act, 2017 - HELD THAT - The service rendered by the Respondent by way of construction of the project Habitat-78 was not in existence during the pre-GST regime and that the project was, in fact, launched only after the implementation of GST. Annexure 8 of the DGAP's Report clearly shows that buyer's agreement with the Applicant No. 1 for the Apartment No. A4806 was signed on 17th November 2017 where it was written that the allotment was made vide letter dated 01.11.2017. The buyer's agreement also states that 'the company had since registered the project under the provisions of the Real Estate (Regulation and Development) Act, 2016 read with the Rules notified there under by the Haryana Real Estate Regulatory Authority on 22.08.2017 under registration no. 78 of 2017'. The project was launched only after the implementation of GST. As there was no comparative pre-GST ITC that was accumulated or utilized by the Respondent the question of profiteering does not arise. The main allegation of the above Applicant was that GST @12% was charged instead of 8%. However as noticed from the demand letter dated 16.04.2018 which the above Applicant had quoted the total value was shown as ₹ 3,21,124/- and the taxable value was shown as ₹ 2, 14,083/- (2/3rd of the total value of ₹ 3,21,124/, separately for calculating the tax liability and the Respondent had charged GST @ 12% on the taxable value which was 2/3rd of the total value. Therefore, the effective rate of GST was 8% on the total value of ₹ 3,21,124/-, which clearly shows that the Respondent had reduced the GST rate from 12% to 8% w.e.f 25.01.2018, in terms of Notification No. 01/2018 Central Tax (Rate) dated 25.01.2018. It is also observed that based on the above clarification the Applicant No. 1 has admitted her mistake and withdrawn her complaint. Thus, it is clearly established that the Respondent had not contravened the provisions of Section 171 of the CGST Act, 2017 - application dismissed.

Summary

Issues Involved:
1. Whether there was any increased benefit of Input Tax Credit (ITC) w.e.f. 01.07.2017.
2. Whether there was a reduction in the rate of tax on the service in question w.e.f. 25.01.2018.
3. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 by not passing on the benefit.

Issue-wise Detailed Analysis:

I. Increased Benefit of ITC w.e.f. 01.07.2017:
The Respondent argued that the project "Habitat-78" was launched after the implementation of GST, and there was no sale or booking of flats in the pre-GST regime. Therefore, there was no pre-GST reference price for comparison to determine if there was any increased benefit of ITC. The DGAP confirmed that the project was not in existence before the implementation of GST and was launched only in the GST regime. Consequently, there was no pre-GST ITC that could be compared with post-GST ITC, thus the question of profiteering does not arise.

II. Reduction in the Rate of Tax w.e.f. 25.01.2018:
The Applicant alleged that the Respondent charged 12% GST instead of the reduced rate of 8% for affordable housing projects post 25.01.2018. The Respondent clarified that while the GST was charged at 12% on the taxable value (2/3rd of the total value), this effectively amounted to 8% of the total demand. The DGAP's report and the demand letter dated 16.04.2018 confirmed that the Respondent had indeed reduced the GST rate from 12% to 8% as per Notification No. 01/2018 Central Tax (Rate) dated 25.01.2018.

III. Violation of Provisions of Section 171 of the CGST Act, 2017:
The Respondent contended that the anti-profiteering provisions did not apply as the project was launched post-GST implementation and there was no pre-GST pricing to compare. The DGAP's report supported this, stating that there was no pre-GST tax rate or ITC to compare with post-GST conditions. Moreover, the Applicant withdrew her complaint and surrendered the flat, acknowledging the correct application of GST by the Respondent. Thus, it was concluded that the Respondent did not violate Section 171 of the CGST Act, 2017.

Conclusion:
The Authority concluded that the Respondent had not contravened the provisions of Section 171 of the CGST Act, 2017. The Respondent correctly applied the reduced GST rate and there was no increased benefit of ITC to be passed on. The application filed by the Applicants was dismissed due to lack of merit.