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2019 (10) TMI 935 - NAPA - GSTProfiteering - purchase of two flats in the project River View Heights - benefit of input tax credit by way of commensurate reduction in price not passed on - contravention of section 171 of CGST Act - HELD THAT - From the perusal of the DGAP's Report it is revealed that the ratio of ITC to the taxable turnover during the pre-GST period was to the extent of 2.37% as compared to post-GST period of 2.65% thus, there was net benefit of 0.28% of ITC to the Respondent. Based on this net benefit and the amounts collected from the home buyers during the post GST period, an amount of ₹ 2,13,468/- has been computed as the profiteered amount as per Annexure-13 of the DGAP report. The Respondent has raised no objection a ins computation of the above amount made by the DGAP vide Annexure-13 and hence it can be relied upon - Respondent has also not denied the fact that there has been net benefit of ITC during the post GST period and has vide submissions dated 04.05.2019, suo-moto decided to pass on the benefit as computed by the DGAP in his Report dated 24.04.2019, which is ₹ 2,13,468/- within due period as was mentioned in the Report. This Authority under Rule 133 (3) (a) of the CGST Rules, 20170rders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by them as has been detailed above. Since the present investigation is only up to 31.10.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondents - The concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible house buyers in future. Penalty - HELD THAT - The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his River View Heights Project in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus resorted to profiteering. Hence, he has committed an offence under section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section - a SCN be issued to him directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
Issues Involved:
1. Non-passing of Input Tax Credit (ITC) benefits. 2. Calculation and determination of profiteering amount. 3. Compliance with Section 171 of the CGST Act, 2017. 4. Penalty for contravention of anti-profiteering provisions. 5. Scope of investigation limited to Phase-II of the project. Detailed Analysis: 1. Non-passing of Input Tax Credit (ITC) benefits: The Applicant alleged that the Respondent did not pass on the benefit of ITC by reducing prices for two flats in the "River View Heights" project. The DGAP's investigation revealed that the Respondent acknowledged the project was under construction and had not quantified the ITC benefit due to the absence of an Occupancy Certificate. The Respondent's claim that the entire consideration was paid post-GST was verified through sale agreements and payment details. 2. Calculation and determination of profiteering amount: The DGAP's report indicated that the Respondent benefited from an additional ITC post-GST, increasing from 2.37% pre-GST to 2.65% post-GST, resulting in a net benefit of 0.28%. The DGAP compared the applicable tax rates and ITC ratios between pre-GST and post-GST periods, recalibrating the basic price and determining the excess realization (profiteering) amount as ?2,13,468/-. This included 12% GST on the base profiteering amount of ?1,90,596/-, affecting 26 home buyers. 3. Compliance with Section 171 of the CGST Act, 2017: The Authority confirmed the DGAP's findings and determined that the Respondent had indeed benefited from additional ITC and had not passed this benefit to the buyers, contravening Section 171(1) of the CGST Act, 2017. The Respondent agreed to pass on the computed benefit of ?2,13,468/- to the buyers, including interest at 18% from the date of realization until payment. 4. Penalty for contravention of anti-profiteering provisions: The Respondent's failure to pass on the ITC benefits constituted an offence under Section 171(3A) of the CGST Act, 2017. The Authority directed the issuance of a Show Cause Notice to the Respondent to explain why the penalty prescribed under Section 171(3A) should not be imposed. 5. Scope of investigation limited to Phase-II of the project: The investigation was restricted to Phase-II of the "River View Heights" project. The Authority noted discrepancies in the total area of the project provided by the Respondent and directed the DGAP to investigate the entire project to ensure compliance with Section 171 of the CGST Act, 2017. Conclusion: The Authority ordered the Respondent to reduce prices commensurate with the ITC benefit received and pass on any future benefits to buyers. The Commissioners of CGST/SGST Gujarat were directed to monitor compliance and ensure the profiteered amount was passed on to eligible buyers, with a compliance report to be submitted within four months.
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