2024 (8) TMI 1088 - CCI - GST

Profiteering - Respondent had not passed on the benefit of reduction in rate of tax or input tax credit (ITC) to him by way of commensurate reduction in the price - contravention of provisions in Section 171 (1) of the CGST Act 2017 - whether there was any reduction in the GST rate or the benefit of ITC and whether the benefit of rate reduction or ITC was passed on or not to the recipients as provided under Section 171 of the CGST Act, 2017? - HELD THAT - It is clear from the DGAP's Report that the Respondent had started the above project in the post-GST regime as the commencement certificate was issued to him on 08.03.2018 by the Ahmedabad Urban Development Authority and the Respondent was registered under GST w.e.f.27.02.2018. As per the ITC register submitted by the Respondent, the first purchase invoice was issued on 27.02.2018. On perusal of the copies of sale agreements of all the customers submitted by the Respondent, it was found that there was no sale or even booking of the units in the above project during pre-GST regime. As far as rate reduction benefit is concerned, the Commission finds that after the implementation of the GST w.e.f. 01.07.2017, the Respondent was charging GST @ 8% with ITC. W.e.f. 01.04.2019, the Respondent was given the option either to charge GST @ 8% with ITC or 1% without ITC from the flat buyers vide Notification No. 03/2019-Central Tax (Rate) dated 29.03.2019. The Respondent continued to charge GST @ 8% with ITC instead of 1%without ITC from the flat buyers. Therefore, as the Respondent had continued to opt for an effective GST rate of 8% along with ITC, there was no benefit of reduced rate to be passed on to the flat buyers. The Commission observes that no benefit of reduction of rate or additional ITC during the GST period as compared to the pre-GST period has accrued in the case of this Project to the Respondent, which he is obliged to pass on to his buyers. Hence, the allegations made by the Applicant No. 1 are not tenable. The Commission finds that the provisions of Section 171 (1) of the CGST Act,2017 are not attracted in the Respondent's project Swastik Heights . Therefore, the proceedings in the present case are hereby dropped.

Summary

Issues:
Allegations of non-passing of tax benefits to the buyer by the respondent in a real estate project.

Detailed Analysis:

1. Allegations and Investigation:
The case involved an allegation by Applicant No. 1 against the Respondent for not passing on the benefit of tax reduction or input tax credit (ITC) to him in a real estate project. The investigation conducted by the DGAP revealed that the Respondent charged GST at 8% with ITC from all flat buyers, instead of the reduced rate of 1% without ITC from 01.04.2019. The Respondent denied passing on any benefit of ITC to the flat owner, leading to the initiation of the investigation.

2. DGAP Findings and Respondent's Submissions:
The DGAP examined the application, responses from the Respondent, and relevant documents. The main issues were to determine if there was a benefit of tax reduction or ITC on construction services post-GST implementation and if the benefit was passed on to the buyers. The DGAP found that as the project commenced after the GST implementation, there was no pre-GST turnover or ITC to compare with the post-GST period, concluding that Section 171 of the CGST Act, 2017 was not applicable.

3. Commission's Consideration and Decision:
The Commission reviewed the DGAP's report and documents, observing that the Respondent started the project in the post-GST regime and continued to charge GST at 8% with ITC, despite the option to charge 1% without ITC from 01.04.2019. As there was no accrued benefit of tax reduction or additional ITC during the GST period, the Commission found the allegations baseless. Consequently, the provisions of Section 171 (1) of the CGST Act, 2017 were deemed not applicable to the Respondent's project, leading to the closure of the proceedings.

4. Re-investigation and Final Decision:
Following a directive to re-investigate cases in the real estate sector, the DGAP confirmed that the project in question fell entirely within the post-GST period, rendering Section 171 inapplicable. The Commission, after a hearing with Applicant No. 1, reiterated the findings that no benefit of tax reduction or ITC was due to the Respondent, resulting in the dismissal of the case.

5. Conclusion and Order:
The Commission decided that the allegations of non-passing of tax benefits by the Respondent were unfounded, and the proceedings were dropped. The order was to be shared with all parties involved, and the case file was to be closed upon completion.

This detailed analysis outlines the legal proceedings, findings, and decisions concerning the allegations of non-passing of tax benefits in a real estate project, ultimately leading to the dismissal of the case by the Competition Commission of India.