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2019 (7) TMI 237 - NAPA - GSTProfiteering - supply of construction services related to purchase of Flat - benefit of reduction in the rate of tax not passed on by passing on the additional benefit of Input Tax Credit after implementation of CST - contravention of Section 171 of CGST Act - HELD THAT - The above project had been started after coming in to force of the GST w.e.f. 01 07.2017. It is also clear that the above Applicant had deposited the security amount for allotment of the flat on 18.08.2017 and was given the allotment on 20 11.2017 on the basis of the draw of lots held on 16.11.2017. The agreement between the above Applicant and the Respondent was executed on 13.12.2017. Therefore, it is apparent that the Applicant No. 1 had applied for allotment and was allotted the above flat after coming in to force of the GST w.e.f. 01.07.2017. Since the above project was not under execution in the pre-GST period i.e. before 01.07.2017 therefore, no comparison can be made between the ITC which was available to the Respondent before 01.07 2017 and after 01.07.2017 to determine whether the Respondent had benefitted from additional availability of ITC or not. There has been no additional benefit of ITC to the Respondent and hence he was not required to pass on its benefit to the above Applicant by reducing the price of the flat. The Applicant No. 1 could have availed the above benefit only if the above project was under execution before coming in to force of the GST as the Respondent would have been eligible to avail ITC on the purchase of goods and services after 01.07.2017 on which he was not entitled to do so before the above date. Since there was no basis for comparison of ITC available before and after 01.07.2017, the Respondent was not required to recalibrate the price of the flat due to additional benefit of ITC. It is clear from Section 171 (1) of the CGST Act, 2017, that there should either be reduction in the rate of tax or the benefit of ITC which is required to be passed on to the recipients by commensurate reduction in the price - Since there has been no reduction in the rate of tax or benefit of additional ITC to the Respondent the provisions of the above Section are not attracted in the present case and the allegation of profiteering is not established against the Respondent. Application dismissed.
Issues Involved:
1. Whether there was a reduction in the rate of tax on the construction services as alleged by the Applicant No. 1? 2. Whether there was a benefit of additional Input Tax Credit (ITC) available to the Respondent which was not passed on by him to the Applicant No. 1? 3. Whether there was any violation of the provisions of Section 171 (1) of the CGST Act, 2017 by the Respondent? Detailed Analysis: Issue I: Reduction in the Rate of Tax on Construction Services The Applicant No. 1 alleged that the rate of tax on construction services had been reduced from 12% to 8% by the Central Government, and as per the directive issued by the CBIC, he should not have been charged GST on the amount deposited. The Respondent charged GST at 12% initially and then at 8% post the notification dated 21.01.2018. The Authority found that the price of the flat was fixed after considering the availability of ITC post-GST, and the Applicant had agreed to bear the GST burden as per the terms of the agreement. Therefore, the claim that the Applicant should not have been charged GST was untenable. The Respondent had correctly charged the GST rates as per the applicable notifications, and since the project was not under execution in the pre-GST period, no comparison could be made between pre and post-GST rates to establish any reduction in tax rate benefit that needed to be passed on. Issue II: Benefit of Additional ITC The Applicant No. 1 claimed that the benefit of ITC had not been passed on by the Respondent. The investigation revealed that the project Solera-2 was started post-GST, and there was no pre-GST ITC available for comparison. The Respondent provided an affidavit stating that no ITC was availed during the pre-GST period, and the first ITC was taken on 28.07.2017 post-GST implementation. Since the project began after GST implementation, there was no additional ITC benefit that the Respondent needed to pass on. The Authority concluded that the allegations regarding the non-passing of ITC benefits were incorrect and could not be accepted. Issue III: Violation of Section 171 (1) of the CGST Act, 2017 Section 171 (1) of the CGST Act, 2017 mandates that any reduction in the rate of tax or benefit of ITC should be passed on to the recipient by way of commensurate reduction in prices. The Authority found that since there was no reduction in the rate of tax or additional ITC benefit to the Respondent, the provisions of Section 171 (1) were not attracted in this case. The Respondent had not contravened the provisions of Section 171 (1) of the CGST Act, 2017, and thus, the allegation of profiteering was not established against the Respondent. Conclusion: Based on the above findings, the Authority dismissed the application filed by the Applicants, concluding that the Respondent had not violated the provisions of Section 171 (1) of the CGST Act, 2017. The order directed that a copy be sent to the Applicants and the Respondent free of cost, and the case file be consigned after completion.
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