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2023 (12) TMI 148 - CCI - GSTProfiteering - flat bought in the Respondent's project - Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in price - contravention of section 171 of CGST Act - Penalty - HELD THAT - It is clear from the plain reading of Section 171 (1) that it deals with two situations - One relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to 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 as to whether there was any net benefit of ITC with the introduction of GST. This Commission finds 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 4.19%, whereas, during the post-GST period (July-2017 to December, 2019), it was 4.26%. This confirms that in the post-GST period, the Respondent has been benefited from additional ITC to the tune of 0.07% (4.26% - 4.19%) of his turnover and the same is required to be passed on by him to the recipients of supply, including the Complainant. The Respondent had sold 85 units before receipt of Occupancy Certificate out of which 32 units were in affordable category on which he had charged 8% GST (after 1/3 abatement towards land) remaining 53 units were other than affordable category on which GST was charged @12% (after 1/3rd abatement towards land). Out of the 85 units, 33 units were sold Post-GST and prices were negotiated after ITC adjustments. Hence, there were only 52 units in respect of which benefit of ITC was required to be passed on. The Commission also finds that the computation of the amount of ITC benefit to be passed on by the Respondent to the eligible recipients works out to Rs. 6,43,756/- which includes applicable GST (12% or 8%) on the base amount of Rs. 5,79,349/- with respect to 52 homebuyers on the basis of the information supplied by the Respondent. The Respondent has not disputed the methodology adopted by the DGAP or the amount of profiteering worked out by the DGAP. The profiteered amount for the period from 01.07.2017 to 03.12.2019, in the instant case, is determined as Rs. 35,114/- under Section 171 of the CGST Act, 2017. Penalty - HELD THAT - Respondent has denied the benefit of Input Tax Credit (ITC) to the customers/shop buyers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus committed an offence under Section 171 (3A) of the above Act and therefore, he is liable for imposition of penalty under the provisions of the above Section. However, since the provisions of Section 171 (3A) have come into force w.e.f. 01.01.2020 whereas the period during which violation has occurred is w.e.f. 01.07.2017 to 03.12.2019, hence the penalty prescribed under the above Section cannot be imposed on the Respondent retrospectively. Accordingly, Show Cause Notice directing him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him, is not required to be issued.
Issues Involved:
1. Whether there was the benefit of reduction in the rate of tax or additional benefit of ITC on the supply of Construction Services by the Respondent on implementation of GST. 2. Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the CGST Act, 2017. Summary: Issue 1: Benefit of Reduction in Tax Rate or Additional ITC The DGAP's investigation revealed that post-GST, the Respondent could avail ITC of GST paid on all inputs and input services, unlike the pre-GST period where no credit was available for Central Excise Duty and VAT paid on inputs. The ITC as a percentage of turnover increased from 4.19% pre-GST to 4.26% post-GST, confirming an additional ITC benefit of 0.07%. Issue 2: Passing on the Benefit to Recipients The Respondent was required to pass on the additional ITC benefit to the recipients. The DGAP's report indicated that the Respondent had passed on an excess benefit of Rs. 94,83,735 to 48 homebuyers but had not passed on Rs. 35,114 to four homebuyers. The Respondent provided evidence of payments made to these four homebuyers, which was confirmed by the bank. Findings and Order: - The Commission found that the Respondent had contravened Section 171 (1) of the CGST Act, 2017, by not passing on the benefit of ITC to all eligible recipients. - The Respondent was directed to pay interest at 18% on the profiteered amount from the date of profiteering till the date of payment. - The DGAP was instructed to ensure compliance with the payment of interest, and the concerned jurisdictional CGST/SGST Commissioner was to submit a compliance report within four months. The Commission concluded that although the Respondent had passed on the ITC benefit to the majority of recipients, the interest on the shortfall amount was still due. No penalty was imposed as the relevant provision came into force after the period of violation.
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