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2019 (12) TMI 461 - NAPA - GSTProfiteering - purchase of flats in the Respondent s project - allegation that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to them by way of commensurate reduction in price after implementation of GST w.e.f. 01.07.2017 and had charged GST on the pre-GST full amount of instalments - contravention of provisions of Section 171 of the of the CGST Act, 2017. HELD THAT - It was established from the perusal of the above facts of the case that the provisions of Section 171 of the CGST Act, 2017 had been contravened by the Respondent as he had profiteered an amount of ₹ 3.45,22.974/- which includes GST @12% as applicable on the base profiteered amount of ₹ 3,08,24,084/- from the 243 residential units for the period w.e.f. 01.07.2017 to 31,10.2018 as per Annexure- 15 of the Report Accordingly, the above amounts shall be paid to the above Applicants and the other eligible house buyers by the Respondent along with interest @18% from the date from which these amounts were realized from him till he was paid as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017, failing which shall be recovered by the concerned Commissioner CGST/SGST and paid to the eligible house buyers. It is clear that the Respondent has profiteered by an amount of ₹ 3,45,22,974/- during the period of investigation. Therefore, in view of the facts, the Authority under Rule 133 (3) (a) of the CGST Rules, 2017, orders that the Respondent shall reduce/refund the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. As far as the final computation of the additional ITC that will be available to the Respondent is concerned, the same cannot be determined at this stage, as the construction of the project is yet to be completed - any additional benefit of ITC, which may accrue to the Respondent subsequently, shall also be passed on by him to all eligible buyers. In case this additional benefit is not passed on to the Applicant No. 1 to 10 or other eligible buyers, they shall be at liberty to approach the Andhra Pradesh State Level Screening Committee for initiating fresh proceedings under the provisions of Section 171 of the above Act against the Respondent. The concerned jurisdictional CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC was 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 contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the Section - SCN be issued to him directing him to explain as to 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. Application disposed off.
Issues Involved:
1. Determination of net additional benefit of Input Tax Credit (ITC) to the Respondent post-GST implementation. 2. Violation of Section 171 of the CGST Act, 2017 by not passing on the benefit of ITC to the buyers. 3. Methodology for calculating profiteering. 4. Inclusion of transitional credit in post-GST ITC. 5. Computation of profiteering amount and its refund to the buyers. 6. Imposition of penalty under Section 171 (3A) of the CGST Act, 2017. Detailed Analysis: 1. Determination of Net Additional Benefit of ITC to the Respondent: The DGAP's investigation revealed that the Respondent availed ITC of ?1,97,04,325 during the pre-GST period and ?5,32,85,487 during the post-GST period, resulting in an additional ITC benefit of 6.03% of the turnover. The Respondent contended that the exact benefit of ITC could only be determined upon completion of the project and receipt of the completion certificate. However, the DGAP concluded that the benefit of additional ITC was required to be passed on to the recipients as per Rule 129 (6) of the CGST Rules, 2017. 2. Violation of Section 171 of the CGST Act, 2017: The DGAP reported that the Respondent did not pass on the benefit of ITC to the buyers by way of commensurate reduction in prices, thus violating Section 171 of the CGST Act, 2017. The Respondent's argument that the benefit of ITC was passed on by offering a discount of 3% was found insufficient. The DGAP's calculation showed that the Respondent profiteered an amount of ?3,45,22,974, including GST on the base profiteered amount. 3. Methodology for Calculating Profiteering: The Respondent argued that the DGAP's methodology was incorrect and that no specific guidelines were prescribed under the GST laws. The DGAP, however, used a consistent methodology across real estate cases, considering the increase in ITC as a percentage of total taxable turnover. The Authority upheld the DGAP's methodology, stating that profiteering has to be determined on a case-to-case basis, and no fixed mathematical formulation can be applied universally. 4. Inclusion of Transitional Credit in Post-GST ITC: The Applicants contended that the transitional credit of ?1,31,25,206 should be included in post-GST ITC. The DGAP clarified that the transitional credit related to pre-GST ITC of Excise Duty/Service Tax/VAT and was carried forward as transitional credit in form TRAN-1. It was not a new credit availed post-GST. The Authority agreed with the DGAP's view, rejecting the Applicants' contention. 5. Computation of Profiteering Amount and Its Refund to the Buyers: The DGAP's investigation period was from 01.07.2017 to 31.10.2018. The Respondent's claim of having passed on ?5,04,818 to the Applicants was to be verified. The Authority directed the DGAP to verify the Respondent's claim with conclusive evidence like affidavits from the Applicants or credit notes issued to the recipients. The total profiteered amount was determined to be ?3,45,22,974, including GST @12% on the base profiteered amount of ?3,08,24,084. This amount was to be refunded to the eligible buyers along with interest @18% from the date of realization till the payment date. 6. Imposition of Penalty: The Authority found that the Respondent denied the benefit of ITC to the buyers, contravening Section 171 (1) of the CGST Act, 2017, and committed an offense under Section 171 (3A) of the Act. A Show Cause Notice was to be issued to the Respondent for imposing a penalty under Section 171 (3A) read with Rule 133 (3) (d) of the CGST Rules, 2017. Conclusion: The Authority ordered the Respondent to reduce/refund the price to be realized from the buyers commensurate with the benefit of ITC received. The DGAP was directed to carry out a comprehensive investigation post the issuance of the occupancy certificate for the project. The Commissioners of CGST/SGST Andhra Pradesh were directed to monitor the order's compliance and submit a report within three months. A copy of the order was to be supplied to the Applicants, the Respondent, Commissioners CGST/SGST, and Principal Secretary (Town & Planning), Government of Andhra Pradesh.
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