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2022 (6) TMI 1164 - NAPA - GSTProfiteering - construction service supplied by the Respondent - benefit of input tax credit not passed by way of commensurate reduction in the price in the project - contravention of section 171 of CGST Act - Penalty - HELD THAT - The Authority finds that the allotment of units, agreements, booking, construction activity and receipt of payments had taken place in the post-GST era. The draw of lots for allotment of houses was conducted on 05.07.2017 in the presence of the committee constituted under the Affordable Housing Policy, 2013. The Authority also finds that first BBA between the flat buyers the Respondent was executed on 20.07.2017 in the post GST period. On the basis of the sequence of the above events, it could be safely concluded that the above project had started after coming in to force of the GST w.e.f. 01.07.2017 and Applicants were allotted flats only after coming in to force of the GST w.e.f. 01.07.2017, as the allotment cum first tax invoice for demand was issued after the implementation of the GST w.e.f. 01.07.2017, hence apparently there was no pre-GST tax rate or input tax credit availability that could be compared with the post-GST tax rate and the input tax credit, to determine whether there was any benefit that was required to be passed on by way of reduced price. 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 Applicants could have availed the above benefit only if the above project was under execution/implementation 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 flats due to additional benefit of ITC. Hence, the allegations of the above Applicants made in this behalf are incorrect and therefore, the same cannot be accepted Thus, 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.
Issues Involved:
1. Whether there are benefits of additional Input Tax Credit (ITC) available to the Respondent which are not passed on to the Applicants? 2. Whether there is any violation of the provisions of Section 171 (1) of the Central Goods and Services Tax (CGST) Act, 2017 by the Respondent? Issue-wise Detailed Analysis: Issue 1: Whether there are benefits of additional ITC available to the Respondent which are not passed on to the Applicants? The Director General of Anti-Profiteering (DGAP) received four applications alleging that the Respondent had not passed on the benefit of ITC by way of commensurate reduction in prices for the project "The Roselia Sector-95A" in Gurugram, Haryana. The investigation covered the period from 01.07.2017 to 30.11.2020. The Respondent argued that the provisions of Section 171 of the CGST Act, 2017, apply only in two cases: reduction in the rate of tax and the benefit of ITC by way of commensurate reduction in price. The Respondent stated that all agreements and construction activities occurred after the introduction of GST, and as such, there was no pre-GST turnover or input tax credit availability to compare with the post-GST period. The DGAP's investigation revealed that all events related to the project, including allotment of units, agreements, booking, and construction activities, took place in the post-GST period. There was no sale or allotment of flats in the pre-GST regime, and the project began in the post-GST era. Therefore, there was no pre-GST base price to compare with the post-GST price to determine any profiteering. The Applicants argued that the GST rates on the supply in question were reduced to 1% without ITC from the earlier rate of 8% effective from 1st April 2019. They claimed that the Respondent had not passed the benefit of ITC to the buyers as required for ongoing projects where old rates were opted. However, the DGAP clarified that the project started in the post-GST period, and there was no pre-GST turnover or ITC available for comparison. Issue 2: Whether there is any violation of the provisions of Section 171 (1) of the CGST Act, 2017 by the Respondent? The Authority found that the Respondent had charged GST at the rates applicable during the relevant periods and had not availed the option of 1% GST without ITC. The allotment and sale of flats commenced during the post-GST period, and there was no price history from the pre-GST period to compare for determining any profiteering. The Authority concluded that the project "The Roselia Sector-95A" started after the implementation of GST, and all relevant activities occurred in the post-GST period. Therefore, there was no additional benefit of ITC to the Respondent that needed to be passed on to the Applicants by reducing the prices of the flats. The Authority dismissed the applications filed by the Applicants, finding no merit in their claims. The Respondent had not contravened the provisions of Section 171 (1) of the CGST Act, 2017. Conclusion: The Authority concluded that there was no additional benefit of ITC to the Respondent and no requirement to pass on any benefit to the Applicants by reducing the prices of the flats. The applications filed by the Applicants were dismissed, and the Respondent was found not to have violated the provisions of Section 171 (1) of the CGST Act, 2017.
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