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2020 (3) TMI 405 - NAPA - GSTProfiteering - purchase of a flat - allegation that Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price, on introduction of the GST w.e.f. 01.07.2017 - contravention of section 171 of CGST Act - penalty - HELD THAT - Prior to the implementation of the GST w.e.f. 01.07.2017, Service Tax on construction service was chargeable @ 4.50% (vide Notification No. 14/2015-ST dated 19.05.2015). however, after implementation of the GST w.e.f. 01.07.2017, GST on construction service was changeable @ 18% (effective rate was 12% in view of 1/3rd abatement on value) which was imposed vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was further reduced for low cost affordable housings to 12% GST (effective rate was 8% in view of 1/3rd abatement on value), vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018 (in respect of affordable and low-cost house upto a carpet area of 60 square meters) and hence it is established that there was no rate reduction w.e.f. 01.07.2017 in the case of construction service for low cost affordable houses which the above Applicant has purchased. Hence, no benefit of tax reduction was required to be passed on to him. It is also revealed from the record that during the pre-GST era the Respondent was eligible to avail CENVAT Credit of Service Tax paid on the input services and post GST, the Respondent was eligible to avail the input tax credit of GST paid on all the inputs and input service including the sub-contracts. However, the Respondent has not availed any benefit of CENVAT or ITC in the pre and post GST era and hence, there was no additional benefit available to the Respondent which was to be passed on to his buyers - it is established that the Respondent was not liable to pass on the benefit of ITC to the Applicant No. 1 and thus he has not contravened the provisions of Section 171 of the CGST Act, 2017. There is no merit in the application filed by the Applicant No. 1 - application dismissed.
Issues Involved:
1. Reduction in the rate of tax on construction service w.e.f. 01.07.2017. 2. Increased benefit of Input Tax Credit (ITC) w.e.f. 01.07.2017. 3. Violation of Section 171 of the CGST Act, 2017 by not passing on the benefit. Issue-Wise Detailed Analysis: I. Reduction in the rate of tax on construction service w.e.f. 01.07.2017: The DGAP's investigation revealed that prior to GST implementation, Service Tax on construction service was chargeable at 4.50%. Post-GST, the rate changed to 18% (effective 12% with 1/3rd abatement) and further reduced to 8% for affordable housing. The authority concluded that there was no rate reduction w.e.f. 01.07.2017 for the type of construction service in question, thus no benefit of tax reduction was required to be passed on to the applicant. II. Increased benefit of ITC w.e.f. 01.07.2017: The DGAP's report indicated that the respondent was eligible for CENVAT Credit on input services pre-GST and ITC on all inputs and services post-GST. However, the respondent did not avail any such credits in either period. Therefore, no additional benefit was available to be passed on to the buyers. The Deputy Commissioner of State GST also confirmed that the respondent had not availed ITC post-GST implementation. III. Violation of Section 171 of the CGST Act, 2017 by not passing on the benefit: Section 171 mandates that any reduction in tax rate or benefit of ITC must be passed on to the recipient by way of commensurate reduction in prices. Since there was no reduction in tax rate and no ITC benefit availed by the respondent, the authority determined that there was no contravention of Section 171 by the respondent. Consequently, the application alleging profiteering was dismissed. Conclusion: The authority concluded that the respondent was not liable to pass on any benefit of ITC to the applicant, as there was no reduction in the tax rate and no additional ITC benefit availed. Thus, the respondent did not violate Section 171 of the CGST Act, 2017, leading to the dismissal of the application.
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