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2022 (10) TMI 368 - NAPA - GSTProfiteering - construction services - allegation is that the benefit of ITC has not been passed by way of reduction in the prices - contravention of section 171 of CGST Act - Interest - penalty - HELD THAT - Section 171 (1) deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second on the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post-GST period; hence, the only issue to be examined is whether there was any net benefit of ITC with the introduction of GST. On this issue, it has been revealed from the DGAP's Report that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 0% and during the post-GST period (July, 2017 to November, 2020), it was 5.92% for the Project at Kamayani Nagar at Rau, Indore. This confirms that post-GST, the Respondent has benefited from additional ITC to the tune of 5.92% 5.92% (-) 0% of his turnover for the said Project, and the same was required to be passed on to the customers/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers/customers/recipients as Rs. 26,33,536/- for the Project of the Respondent at Kamayani Nagar at Rau, Indore, the details of which are mentioned in Annexure-16 of the Report, which includes the amount of Rs. 52,873/- of the Applicant No. 1. The Authority finds no reason to differ from the above-detailed computation of profiteering in the DGAP's Report or the methodology adopted and hence, the Authority determines the profiteered amount for the period from 01.07.2017 to 30.11.2020, in the instant case, as Rs. 26,33,536/- for the Project of the Respondent at Kamayani Nagar at Rau, Indore. This Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him. Interest - HELD THAT - The Authority finds that the Respondent has profiteered by Rs. 26,33,536/- for the Project at Kamayani Nagar at Rau, Indore during the period of investigation i.e. 01.07.2017 to 30.11.2020. The above amount that has been profiteered by the Respondent from his home buyers/customers/recipients in the above said Project shall be refunded/returned/passed on by him, along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment, under the provisions of Rule 133 (3) (b) of the CGST Rules, 2017 - Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 26,33,536/- for the Project at Kamayani Nagar, Rau. Indore. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment, as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017. Penalty - HELD THAT - The Respondent has denied the benefit of ITC to the customers/flat buyers/recipients in his Project at Kamayani Nagar at Rau, Indore in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. Section 171 (3A) of the CGST Act, 2017 has been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. As the period of investigation was 01.07.2017 to 30.11.2020, therefore, the Respondent is liable for imposition of penalty under the provisions of the above Section for the amount profiteered from 01.01.2020 onwards. Accordingly, notice be issued to him for such purpose. Application disposed off.
Issues Involved:
1. Allegation of wrong GST rate charged. 2. Failure to pass on the benefit of Input Tax Credit (ITC) post-GST implementation. 3. Calculation and determination of the profiteered amount. 4. Compliance with Section 171 of the CGST Act, 2017. 5. Imposition of penalty and interest on the profiteered amount. Issue-Wise Detailed Analysis: 1. Allegation of Wrong GST Rate Charged: The Applicant alleged that the Respondent charged GST at 12% instead of 1% on the purchase of an EWS house. The investigation revealed that the applicable GST rate for EWS houses was 8% under the Affordable Housing Scheme, not 12%. The Respondent's incorrect charging of GST does not fall under the scope of Section 171 of the CGST Act, 2017. The matter was referred to the jurisdictional GST authorities for necessary action. 2. Failure to Pass on the Benefit of ITC Post-GST Implementation: The DGAP's investigation found that the Respondent had availed ITC of GST to the tune of Rs. 53,74,91,787/- and utilized Rs. 29,26,06,703/- for payment of GST. The Respondent's contention that no ITC was availed was incorrect. The investigation confirmed that the Respondent had benefited from additional ITC post-GST implementation, which should have been passed on to the customers by reducing the prices commensurately. 3. Calculation and Determination of the Profiteered Amount: The DGAP calculated the profiteered amount as Rs. 26,33,536/- for the project at Kamayani Nagar, Rau, Indore. This amount was based on the additional ITC benefit of 5.92% of the turnover that the Respondent received post-GST. The calculation included the base profiteered amount and the excess collection from customers. 4. Compliance with Section 171 of the CGST Act, 2017: Section 171 (1) of the CGST Act mandates that any reduction in the rate of tax or benefit of ITC must be passed on to the recipient by way of commensurate reduction in prices. The Respondent's failure to pass on the ITC benefit to the customers was a violation of this provision. The Respondent's argument that the project started post-GST and hence the provisions were not applicable was rejected. The investigation showed that the base price of the units was fixed in the pre-GST regime, and the benefit of ITC should have been passed on in the GST regime. 5. Imposition of Penalty and Interest on the Profiteered Amount: The Respondent was ordered to refund the profiteered amount of Rs. 26,33,536/- along with interest at 18% from the date of profiteering till the date of payment. The Respondent was also liable for a penalty under Section 171 (3A) of the CGST Act, 2017, for the period from 01.01.2020 onwards. The jurisdictional CGST/SGST Commissioner was directed to ensure compliance and publish an advertisement to inform the affected home buyers. Conclusion: The National Anti-Profiteering Authority concluded that the Respondent had profiteered by Rs. 26,33,536/- by not passing on the benefit of additional ITC post-GST implementation. The Respondent was directed to refund the profiteered amount along with interest and comply with the provisions of the CGST Act, 2017. The matter of incorrect GST rate was referred to the jurisdictional authorities for further action.
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