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2022 (10) TMI 245 - NAPA - GSTProfiteering - construction services - purchase of a flat in the Respondent's project ATS Picturesque Reprieves - allegation is that the Respondent had not passed on the commensurate benefit of input tax credit (ITC) to him by way of commensurate reduction in price - contravention of of Section 171 of the CGST Act, 2017 - HELD THAT - In the instant case, there is no reduction of rate of tax during the relevant period and the only issue which is required to be decided by the Authority is as to whether Respondent is required to pass on the benefit of input tax credit - this Authority agrees with the methodology adopted by the DGAP in its Report to calculate the profiteered amount. Hence, this Authority determines that the Respondent has realized an additional amount of Rs. 12,78,61,818/- which includes both the profiteered amount @ 5.69% of the taxable amount (base price) and GST @ 12% on the said profiteered amount from the 535 buyers/recipients (other than the Applicant No. 1) during the period from 01.07.2017 to 30.09.2020 which was required to be passed on to home buyers/customers/recipients of supply of his impugned project. Since the Applicant No. 1, had booked his unit in the impugned project and paid the amount in pre-GST period only hence the profiteering in respect of the Applicant No.1 has not been calculated by the DGAP. Since, all the home buyers/recipients of supply are identifiable as per the documents placed on record therefore, the Respondent is directed to pass on the above said profiteered amount along with the interest @ 18% per annum (from the dates from which the said profiteered amount was collected by him from each of them till the date such amount is passed on/returned/refunded) to above said buyers/recipients, within a period of 3 months from the date of passing of this Order as per the details mentioned in Annexure- A', failing which the said amounts shall be recovered as per the provisions of the CGST Act, 2017. Penalty - HELD THAT - The Respondent has denied the benefit of ITC to the buyers of his flats/customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017. The Authority holds that the Respondent has committed an offence by violating the provisions of Section 171 (1) and therefore, he is liable for imposition of penalty under the provisions of Section 171 (3A) of the Act. As the said provision has been inserted in the CGST Act, 2017 w.e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019, the Respondent is liable to penalty for the amount profiteered by him from 1.01.2020 onwards. Accordingly notice be issued to the Respondent for such purpose - this Authority under Rule 133 (3) (a) of the CGST Rules, 2017, orders that the Respondents shall reduce the prices to be realized from the home buyers/recipients of supply in the above Project commensurate with the benefit of ITC received by him. The Authority has reason to believe that since the Respondent has been found to have contravened the provisions of Section 171 of the CGST Act 2017 in respect of the subject Project ATS Picturesque Reprieves and hence there is every possibility that similar contravention may has taken place with his other projects. This Authority in terms of Rule 133 (5)(a) of the CGST Rules 2017 also directs the DGAP to investigate profiteering in relation to other Projects executed by the Respondent, if any, under the provision of section 171 of the CGST Act 2017 - the time limit of 06 months provided in Rule 133 (1) of the CGST Rule 2017, is directory in nature to determine and to pass an order by this Authority. Hence this order having been passed today under Rule 133 (1) of the CGST Rules 2017. Application disposed off.
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 by the Respondent on implementation of GST w.e.f. 01.07.2017. 2. Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. Detailed Analysis: 1. Benefit of Reduction in Tax or ITC: The investigation focused on whether the Respondent gained a benefit from the reduction in the rate of tax or ITC upon the implementation of GST from 01.07.2017. The DGAP's report established that the Respondent benefited from additional ITC to the tune of 5.69% of the turnover during the period from 01.07.2017 to 30.09.2020. This was concluded by comparing the ratios of ITC to turnover in the pre-GST period (0.12%) and post-GST period (5.81%). 2. Passing on the Benefit to Recipients: The DGAP concluded that the Respondent did not pass on the benefit of the additional ITC by reducing the base prices of the flats by 5.69%. The Respondent was required to pass on this benefit to the buyers of Phase-I of the project "ATS Picturesque Reprieves" but failed to do so. The DGAP calculated that the Respondent needed to pass on a total benefit of Rs. 12,78,61,818/- to 535 buyers for the period from 01.07.2017 to 30.09.2020. Respondent's Contentions and DGAP's Clarifications: - The Respondent argued that the DGAP's calculations were flawed and that the benefit of ITC should only pertain to goods, not services. They also claimed to have passed on the ITC benefit to all buyers. - The DGAP clarified that the methodology adopted was consistent with previous cases and based on the information provided by the Respondent. The DGAP verified the benefit passed on to buyers through replies from 90 out of 207 home buyers, confirming partial benefit passed on in some cases. Authority's Findings: - The Authority agreed with the DGAP's methodology and found that the Respondent had indeed benefited from the additional ITC and was required to pass on this benefit to the buyers. - The Authority determined that the Respondent had realized an additional amount of Rs. 12,78,61,818/- from the buyers and directed the Respondent to pass on this amount along with interest @ 18% per annum to the buyers within three months. - The Authority also noted that the Respondent had committed an offence by violating Section 171 (1) of the CGST Act, 2017, and is liable for a penalty for the amount profiteered from 01.01.2020 onwards. Conclusion: The Authority concluded that the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017, by not passing on the benefit of ITC to the buyers. The Respondent was directed to pass on the profiteered amount along with interest to the eligible buyers and reduce the prices commensurate with the benefit of ITC received. The Authority also directed the DGAP to investigate profiteering in relation to other projects executed by the Respondent.
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