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2019 (12) TMI 273 - NAPA - GSTProfiteering - purchase of a flat in the Respondent s project Arawali Homes situated at Sector-4, Sohna, Gurgaon, Haryana - applicant had alleged that the Respondent was collecting wrong GST post implementation of GST and was not refunding GST collected in the wrong manner, even after sending clarification that the GST was not applicable to Affordable Housing , as the GST amount could be adjusted against the Input Tax Credit (ITC) - reduction in the rate of tax on the construction service provided by the Respondent w.e.f. 01.07.2017 or not - whether net additional benefit of ITC which has accrued to the Respondent which was required to be passed on by him or not - violation of the provisions of Section 171 of the CGST Act, 2017. HELD THAT - Perusal of the Report dated 26.02.2019 furnished by the DGAP shows that after taking into account the benefit of credit available during the pre-GST period from April, 2016 to June, 2017 to the taxable turnover received during the above period the ratio of ITC to turnover has been computed by the DGAP as 2.42% of the turnover as per Table-B supra. Similarly, the above ratio has been calculated as 10.70% for the post-GST period from 01.07.2017 to 31.08.2018. Accordingly, the DGAP has claimed that the Respondent has benefited to the tune of 8.28% of the turnover which he is required to pass on to his buyers - this Authority determines the profiteered amount as ₹ 4,35,53,927/- (inclusive of applicable GST @ 12% or 8%) for the 1075 residential units for the period from 01.07.2017 to 31.08.2018 as per the details furnished by the DGAP vide Annexure-20 of his above Report. The above amount includes an amount of ₹ 1,74,24,547/- including the GST @ 12% w.e.f. 01.07.2017 to 24.01.2018 and an amount of ₹ 2,61,29,380/- including the GST @ 8% for the period from 25.01.2018 to 31.08.2018. However, the Respondent has passed on ₹ 2,52,63,079/- as benefit of ITC to the above flat buyers as has been duly verified by the DGAP in Table-D. Therefore, the balance profiteered amount of ₹ 1,82,90,848/- 4,35,53,927/- (-) 2,52,63,079/- is required to be returned to the eligible recipients as per the details furnished by the DGAP vide Annexure-21 of the above Report. It is also established from the perusal of the above facts of the case that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondents as he has failed to pass on the benefit of additional ITC to his customers. Accordingly, he is directed to pass on an amount of ₹ 11,863/- to the above applicant and an amount of ₹ 1,82,78,985/- (₹ 1,82,90,848 - ₹ 11,863/-) to the other flat buyers who are not Applicants in the present proceedings as per the details given by the DGAP in Annexure-21 - it is clear that the Respondent has profiteered by an amount of ₹ 4,35,53,927/- during the period of investigation. Therefore, this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. The present investigation is only up to 30.08.2018 therefore, any additional benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 or other buyers they shall be at liberty to approach the State Screening Committee Haryana for initiating fresh proceedings under Section 171 of the above Act against the Respondent. Penalty - HELD THAT - t is evident from the above that the Respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus profiteered as per the explanation attached to Section 171 of the above Act. Therefore, he is liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017 - a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under the above sub-Section should not be imposed on him. Application disposed off.
Issues Involved:
1. Reduction in the rate of tax on construction service provided by the Respondent w.e.f. 01.07.2017. 2. Net additional benefit of Input Tax Credit (ITC) accrued to the Respondent. 3. Violation of Section 171 of the CGST Act, 2017 by the Respondent. Issue-wise Detailed Analysis: 1. Reduction in the rate of tax on construction service provided by the Respondent w.e.f. 01.07.2017: The DGAP's report indicated that the effective GST rate on construction services for affordable and low-cost houses was reduced from 12% to 8% post-GST. The pre-GST period only had VAT @ 5.25%. This reduction in tax rate necessitated an examination of whether the benefit of reduced tax rates was passed on to the customers. 2. Net additional benefit of ITC accrued to the Respondent: The DGAP's investigation revealed that the ratio of ITC to turnover increased significantly post-GST, from 2.42% during the pre-GST period to 10.70% post-GST. This indicated an additional ITC benefit of 8.28% post-GST. The Respondent was required to pass on this benefit to the buyers by reducing the base price of the flats. The DGAP calculated the profiteered amount based on this additional ITC benefit and found that the Respondent had benefitted from an additional ITC of 8.28% of the taxable turnover. 3. Violation of Section 171 of the CGST Act, 2017 by the Respondent: The DGAP's report concluded that the Respondent had not passed on the additional ITC benefit to the customers as required under Section 171 of the CGST Act, 2017. The total profiteered amount was calculated to be ?4,35,53,927/-, including GST. The Respondent had only passed on ?2,52,63,079/- to the buyers, resulting in a balance of ?1,82,90,848/- yet to be refunded to the eligible recipients. The Respondent's failure to pass on the ITC benefit was deemed a contravention of Section 171 of the CGST Act, 2017. Judgment: The Authority ordered the Respondent to pass on the balance amount of ?1,82,90,848/- to the eligible recipients, including ?11,863/- to Applicant No. 1, within three months along with interest @ 18% from the date of realization until payment. The Respondent was also directed to reduce the prices of the flats commensurate with the benefit of ITC received. A Show Cause Notice was issued to the Respondent for imposition of penalty under Section 171 (3A) of the CGST Act, 2017. The Commissioners of CGST/SGST Haryana were directed to monitor the compliance of this order and submit a report within four months.
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