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2019 (11) TMI 467 - NAPA - GSTProfiteering - supply of flats in the Expressway Towers project of the Respondent in Gurugram - benefit of Input Tax Credit (ITC) by way of commensurate reduction in the prices not passed on - contravention of provisions of section 171 of CGST Act - penalty - HELD THAT - Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondents. In case this benefit is not passed on the Applicants or any other buyer shall be at liberty to approach the State Screening Committee Haryana for initiating fresh proceedings under Section 171 of the above Act against the Respondents. The concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible house buyers in future. Penalty - HELD THAT - It is evident from the above that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect and has also compelled his consumers/buyers to pay more GST than that they were required to pay and therefore, he is liable for imposition of penalty - Accordingly, a Show Cause Notice be issued to him 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 impose on him.
Issues Involved:
1. Reduction in the rate of tax on the service. 2. Net additional benefit of Input Tax Credit (ITC). 3. Violation of Section 171 of the CGST Act, 2017, by not passing on the benefits of reduction in the tax rate or additional ITC. Detailed Analysis: Issue 1: Reduction in the rate of tax on the service The judgment examined whether there was a reduction in the rate of tax on the service in question w.e.f. 01.07.2017 and w.e.f. 25.01.2019. The DGAP reported that the effective GST rate on construction services was initially 12% and later reduced to 8% for affordable housing. The Respondent was required to pass on the benefits of this reduction to the buyers. Issue 2: Net additional benefit of ITC The DGAP's investigation covered the period from 01.07.2017 to 31.08.2018. The Respondent availed ITC post-GST implementation, which was not available pre-GST. The DGAP found that the ITC as a percentage of turnover was 3.73% post-GST, confirming an additional benefit to the Respondent. The DGAP calculated the total profiteered amount during the period as ?68,39,570, including GST, which needed to be passed on to the buyers. Issue 3: Violation of Section 171 of the CGST Act, 2017 The DGAP concluded that the Respondent had contravened Section 171 by not passing on the benefit of ITC to the buyers, thereby realizing more price and GST than entitled. The Respondent admitted liability and claimed to have issued credit notes to pass on the benefit along with 18% interest. The Authority ordered the Respondent to reduce prices commensurate with the ITC benefit and ensure refunds/adjustments with interest within three months. Conclusion: The Authority found the Respondent guilty of denying ITC benefits to buyers, thus violating Section 171 (1) of the CGST Act, 2017. A Show Cause Notice was issued to the Respondent for penalty imposition under Section 171(3A). The Commissioner of CGST/SGST Haryana was directed to monitor the implementation of the order and ensure compliance within four months.
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