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2022 (9) TMI 313 - NAPA - GSTProfiteering - purchase of flat - it is alleged that Respondent had not passed on the benefit of the input tax credit by way of commensurate reduction in price to the Applicant - contravention of section 171 of CGST Act - HELD THAT - It is noted that the Respondent is in the real-estate business and has developed his project Sai Partha Sreekar Residency , in Marripalem Vuda Layout, Visakhapatnam. It is also on record that the Applicant No.1 has filed a complaint alleging that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price of the Flat No. 201 purchased from the Respondent in his project Sai Partha Sreekar Residency in terms of Section 171 of the CGST Rules, 2017. The DGAP, after a detailed investigation, has found that the Respondent has not contravened the provisions of Section 171 of the CGST Act, 2017 as the date of commencement of the instant project was after the inception of GST w.e.f. 01.07.2017. Further, the first booking in the instant project was made by the Respondent on 06.09.2018 and the Applicant had booked the Flat no. 201 on 15.10.2018 i.e. in post-GST period. Further, as per the registration details, the Respondent having Registration No. 336/2004 obtained Building Permission from 02.02.2018 which was also the Project starting date. There was no pre-GST tax rate/ details or ITC credit structure/details which could be compared with the post-GST tax rate and ITC - The Applicant No. 1 has not responded on the merit in respect of the DGAP report dated 27.01.2021. The contention of the Applicant No. 1 regarding denial of principles of natural justice is found to be unsustainable as enough opportunities were provided to him to put up in case before the Authority. 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 a benefit of reduction in the rate of tax or Input Tax Credit (ITC) on the supply of construction services after the implementation of GST. 2. Whether the Respondent passed on such benefit to the recipients by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017. Issue-wise Detailed Analysis: 1. Benefit of Reduction in Tax Rate or ITC: The Directorate General of Anti-Profiteering (DGAP) conducted a detailed investigation to determine if the Respondent passed on the benefit of ITC to the Applicant in respect of the purchase of a flat in the project "Sai Partha Sreekar Residency." The investigation covered the period from 01.07.2017 to 31.05.2020. The DGAP noted that prior to the implementation of GST, service tax on construction services was chargeable at 4.50%. After the implementation of GST, the effective GST rate on construction services was 12%, or 8% for affordable housing up to a carpet area of 60 square meters. The DGAP observed that the effective rate of tax in the pre-GST era (4.5%) was lower than the post-GST era (8% or 12%). 2. Passing on the Benefit to Recipients: The DGAP scrutinized the documents and found that the Development Agreement between the landowners and the Respondent was executed on 22.11.2017, and the first booking in the project was made on 06.09.2018, well after the introduction of GST. The Applicant booked the flat on 15.10.2018. The Respondent provided various documents, including GSTR-1 and GSTR-3B returns, electronic credit ledger, and balance sheets, among others. The DGAP concluded that there was no pre-GST turnover or ITC that could be compared with the post-GST period to determine any benefit that needed to be passed on. Therefore, the anti-profiteering provisions were not applicable to the project under investigation. Additional Considerations: The Applicant No. 1 claimed that the Investigating Authority had not supplied all relevant documents, making it difficult to file proper written submissions. The DGAP clarified that the Respondent had claimed confidentiality of all information provided, thus no opportunity was afforded to the Applicant for inspection of the information. The Applicant also argued that the Authority took more than a year for a simple issue and that insisting on written submissions was against natural justice. The DGAP responded that the investigation report was submitted within the stipulated time period. Conclusion: The Authority examined the DGAP's report, the written submissions of the Applicant, and the clarifications provided by the DGAP. It was found that the Respondent had not contravened the provisions of Section 171 of the CGST Act, 2017. The project commenced after the implementation of GST, and there was no pre-GST tax rate or ITC structure to compare with the post-GST period. Thus, there was no benefit of CENVAT to compare ITC available post-GST. The Authority concurred with the DGAP's report and found no contravention of Section 171 (1) of the CGST Act, 2017. Supreme Court Orders: The Supreme Court extended the period of limitations due to the COVID-19 pandemic, which applied to the present proceedings. The Order dated 23.03.2020 and subsequent orders extended the period of limitation till 28.02.2022. Final Order: The Authority found no contravention of Section 171 (1) of the CGST Act, 2017, and concurred with the DGAP's report dated 27.01.2021. A copy of the order was to be supplied to the Applicants and the Respondent, and the case file was to be consigned after completion.
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