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2022 (8) TMI 211 - NAPA - GSTProfiteering - construction services - benefit of ITC had not been passed on to the buyers by way of commensurate reduction in prices - contravention of of Section 171 of the CGST Act, 2017 - Penalty - HELD THAT - In terms of the provisions of the RERA Act, bookings in the project could not happen till the registration was obtained. Since the registration was obtained for the subject projects post the introduction of Goods and Services Tax only, the provisions of Section 171 dealing with Anti-profiteering could not be made applicable to the said projects in the view of the fact that there was no additional ITC that had been made available to the Respondent, which was relevant for establishing any allegation of profiteering. It is clear from the DGAP's Report that the Respondent had launched the subject projects in the post-GST regime and there were no demands raised by the Respondent with respect to these projects in the pre-GST regime. The registration and approval of the projects and receipt of the payments had taken place in the post-GST regime and hence, there was no pre-GST tax rate or ITC which could be compared with the post-GST tax rate and ITC. On this basis, the DGAP has reported that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period and therefore it did not qualify to be a case of profiteering - The instant case does not fall under the ambit of the Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. This Order having been passed today falls within the limitation prescribed under Rule 133 (1) of the CGST Rules, 2017.
Issues Involved:
1. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017. 2. If yes, then what was the quantum of profiteering? Issue-Wise Detailed Analysis: 1. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017: The Director-General of Anti-Profiteering (DGAP) conducted a detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017, to determine if the Respondent had passed on the benefit of Input Tax Credit (ITC) to the eligible recipients as required under Section 171 (1) of the CGST Act, 2017. The investigation covered the period from 01.07.2017 to 30.09.2019. The Respondent challenged the notice issued by the DGAP, arguing that it was issued without jurisdiction and without "reasons to believe" as required under Rule 135 (5)(a) of the CGST Rules, 2017. The Respondent contended that there could be no profiteering in respect of the ongoing projects since they were launched after the implementation of GST. The DGAP's investigation focused on whether there were benefits accruing on account of a reduction in the rate of tax or ITC on the supply of construction services after the implementation of GST and whether such benefits were passed on to the recipients by way of commensurate reduction in prices. The DGAP observed that prior to GST, Service Tax on construction service was chargeable at 4.50%. After GST implementation, the rate was 18% (effective rate 12% with 1/3rd abatement). For affordable housing, the rate was reduced to 12% (effective rate 8%). Under the optional scheme introduced on 29.03.2019, the rate was 1% (effective rate 0.5%) with no ITC eligibility. The DGAP verified that the projects "ROF Aalayas Phase-II, Sector-102, Gurugram" and "ROF Amaltas, Sector-92, Gurugram" were registered post-GST on 27.05.2019, and the first bookings started in June 2019. Since these projects were launched post-GST, there was no reduction in the rate of tax or benefit of additional ITC after their registration. Hence, there was no profiteering and no violation of Section 171 of the CGST Act, 2017. 2. If yes, then what was the quantum of profiteering: The DGAP concluded that no profiteering was found in the case of the projects investigated in the instant investigation. The projects "ROF Aalayas Phase-II, Sector-102, Gurugram" and "ROF Amaltas, Sector-92, Gurugram" were launched in the post-GST era, and there was no pre-GST tax rate or ITC to compare with the post-GST tax rate and ITC. Therefore, the provisions of Section 171 of the CGST Act, 2017, were not attracted. The DGAP's report indicated that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period. Hence, it did not qualify as a case of profiteering. Conclusion: The Authority agreed with the DGAP's findings that the provisions of Section 171 of the CGST Act, 2017, were not contravened in this case. The instant case does not fall under the ambit of the Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. The order was passed within the limitation prescribed under Rule 133 (1) of the CGST Rules, 2017, considering the extensions provided by the Hon'ble Supreme Court due to the Covid-19 pandemic.
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