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2019 (11) TMI 1082 - NAPA - GSTProfiteering - purchase of flats in the Respondents project Green Court situated in Sector 90, Gurugram, Haryana. Sh. Shaurabh Prabhakar - it is alleged that the Respondent had not passed on the benefit Of Input Tax Credit (ITC) to them by way of commensurate reduction in the price of the flats - contravention of the provisions of 171 of CGST Act - penalty - HELD THAT - As per the provisions of section 171 of the CGST Act, 2017, the benefit of the additional ITC which was accrued to the respondent in the post-GST period is required to be passed on to the applicants as well as the other home buyers. Based on the amount collected by the respondent from the applicants and the other home buyers during the period from 01.07.2017 to 24.01.2018, the amount of benefit of ITC which is required to be passed on by the respondents to the recipients or in other words, the profiteered amount comes to ₹ 2,68,17,079/- which includes 12% GST on the base profiteered amount of ₹ 2,39,43,820/-. Penalty - HELD THAT - It is evident that the respondent has denied the benefit of ITC to the buyers of the flats being constructed by him in contravention of the provisions of section 171(1) of the CGST Act, 2017 and has thus committed as per the provisions of section 171 (3A) of the CGST Act, 2017 - a SCN be issued to him directing him to explain why the penalty prescribed under the above provision should not be imposed.
Issues Involved:
1. Whether there was a reduction in the rate of tax on the construction service rendered by the Respondent to the Applicants w.e.f. 01.07.2017? 2. Whether there was any additional benefit of Input Tax Credit (ITC) to the Respondent which was required to be passed on by him to his buyers? 3. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent by not passing on the above benefit? Detailed Analysis: 1. Reduction in the Rate of Tax: - The Respondent admitted that he availed CENVAT Credit under the Service Tax law and ITC under the Haryana Value Added Tax Act, 2003. The Service Tax was exempted for Affordable Housing Schemes through Notification No. 09/2016-Service Tax dated 01.03.2016, and he was not charging Service Tax from his customers. - The Respondent was availing ITC on VAT under the regular scheme to discharge his VAT liability. - Post-GST, the Respondent became eligible to claim the benefit of ITC on Excise Duty, which was not available pre-GST. However, the Respondent’s contention to adjust ITC at the time of handing over possession was not accepted as per Section 171 of the CGST Act, 2017. 2. Additional Benefit of ITC: - The DGAP reported that the ITC as a percentage of the total turnover available to the Respondent during the pre-GST period (April 2016 to June 2017) was 0.49%, and during the post-GST period (July 2017 to August 2018), it was 7.73%, confirming that the Respondent benefited from additional ITC to the tune of 7.24% of the turnover. - The DGAP computed the profiteered amount based on the comparison of the ratio of CENVAT credit to turnover during the pre-GST period and the benefit of ITC to turnover during the post-GST period. - The Respondent’s methodology for calculating the profiteered amount based on material cost was not accepted as it was not verified and did not apply the correct interpretation of Section 171. 3. Violation of Section 171 of the CGST Act, 2017: - The DGAP confirmed that the Respondent did not pass on the benefit of additional ITC through commensurate reduction in the price of the flats. - The total profiteered amount during the period from 01.07.2017 to 31.08.2018 was determined as ?5,30,34,074/- which includes GST @12% or 8% on the base profiteered amount of ?4,82,18,816/-. - The Respondent was directed to refund/reduce the price to be realized from the buyers of the flats commensurate with the benefit of ITC received by him. - The Respondent was also directed to pay the profiteered amount to the eligible house buyers along with interest @18% from the date these amounts were realized till they are paid, within three months from the date of the order. Conclusion: - The Respondent contravened the provisions of Section 171 of the CGST Act, 2017 by not passing on the benefit of additional ITC to the buyers. - The Respondent is liable for imposition of penalty under Section 171 (3A) of the CGST Act, 2017. - The Commissioners of CGST/SGST Haryana were directed to monitor the order and ensure compliance, with a report to be submitted to the Authority within four months.
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