2022 (5) TMI 781 - NAPA - GST

Profiteering - purchase of Flat - allegation is that the benefit of input tax credit had not been passed on - project was not under execution before coming into force of the GST - whether there are benefit of additional ITC available to the Respondent which are not passed on by him to the Applicant No. 1 and 2? - violation of the provisions of Section 171 (1) of the CGST Act, 2017 or not - HELD THAT - It is established that there had been no additional benefit of ITC to the Respondent and hence he is not required to pass on the benefit to the above Applicants by reducing the prices of the flats. The Applicant No. 1 and 2 could have availed the above benefit only if the above project was under execution before coming into 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 is no basis for comparison of ITC available before and after 01.07.2017, the Respondent is not required to recalibrate the price of the flat due to additional benefit of ITC. Hence, the allegations of the Applicants made in this behalf are incorrect and therefore, the same cannot be accepted - it is established that the Respondent had not contravened the provisions of Section 171 (1) of the CGST Act, 2017 and there are no merit in the Applications filed by the above Applicants and the same are accordingly dismissed. This Order having been passed today falls within the limitation prescribed under Rule 133 (1) of the CGST Rules, 2017. Application disposed off.

Summary

Issues Involved:

1. Whether there are benefit of additional ITC available to the Respondent which are not passed on by him to the Applicant No. 1 and 2?
2. Whether there is any violation of the provisions of Section 171 (1) of the CGST Act, 2017 by the Respondent?

Issue-wise Detailed Analysis:

I. Benefit of Additional ITC:

The DGAP reported that the Respondent's project "Avenue-51" was launched in the post-GST era, with no pre-GST price history to compare against. The project received Environmental Clearance on 21.07.2017, and the draw of lots for allotment of units took place on 08.08.2017, both after the GST implementation. The Respondent charged GST at the reduced rate of 8% from 25.01.2018, in compliance with Notification No. 01/2018 Central Tax (Rate) dated 25.01.2018. The DGAP concluded that since the project commenced post-GST, there was no pre-GST tax rate or input tax credit structure to compare with the post-GST period. Therefore, the provisions of Section 171 of the CGST Act, 2017, regarding profiteering, were not applicable.

II. Violation of Section 171 (1) of the CGST Act, 2017:

The DGAP's investigation revealed that the Respondent had availed ITC post-GST but had no pre-GST price history for comparison. The price of Rs. 4000/- per sq. ft. fixed by the Government was an indicative maximum price and not the actual selling price. The DGAP argued that the benefit of ITC availed post-GST could not be compared with the pre-GST period, as there was no turnover or credit in the pre-GST period. Consequently, the ratio of ITC to turnover could not be derived, making profiteering unquantifiable. The DGAP maintained that the provisions of Section 171 (1) were not contravened as the project started post-GST, and there was no additional ITC benefit to be passed on.

Conclusion:

The Authority concluded that the Respondent had not contravened the provisions of Section 171 (1) of the CGST Act, 2017. The project commenced post-GST, and there was no pre-GST price history or ITC benefit comparison available. The Respondent had complied with the reduced GST rate from 12% to 8% as per Notification No. 01/2018 Central Tax (Rate) dated 25.01.2018. Therefore, the allegations of profiteering by the Applicants were found to be incorrect, and the applications were dismissed.

Additional Observations:

The Authority noted procedural delays due to lack of quorum and extensions granted by the Hon'ble Supreme Court due to the COVID-19 pandemic. The order was issued within the extended limitation period prescribed by the Supreme Court.

Order:

The applications filed by the Applicants were dismissed, and a copy of the order was sent to the Applicants and the Respondent free of cost. The case file was consigned after completion.