2019 (12) TMI 219 - NAPA - GST

Scope of provisions of 171 of CGST Act - Profiteering - supply of construction services related to purchase of Flat - benefit of reduction in the rate of tax or ITC had not been passed on - contravention of provisions of 171 of CGST Act - whether there was any net benefit of ITC with the introduction of GST? - HELD THAT - As per the report of DGAP, the ratio of ITC in pre-GST period was higher than the post-GST period. - DGAP has further Reported that the Respondent, vide his reply dated 14.06.2019, has only furnished his correspondence with his 11 home buyers before the DGAP and no account statement pertaining to these home buyers had been submitted by him before the DGAP to support his claim. DGAP has further reported that the Respondent had mentioned in the last para of his letter to 11 home buyers that this amount of profiteering was merely based on a provisional computation at his end. There are no reason to differ from the Report of DGAP and we therefore agree with his findings since there was no reduction in the rate of tax nor there was increased additional benefit on account of ITC. Hence, the provisions of Section 171 of CGST Act, 2017 are not liable to be invoked in this case, notwithstanding the contention of the Applicant No. 1 that the Respondent had issued a credit note to him which indicated that an amount of ₹ 1,12,080/- was being passed on to him. We take cognizance of the Report of DGAP dated 07.10.2019 that this issue had already been considered by him during the investigation and was found extraneous to the computation of profiteering since the communications regarding the credit note issued by the Respondent were based on a mere provisional computation of the amount of profiteering on his (Respondent) part. We also find that on his part, the Applicant No. 1 has also not substantiated his allegations during the course of the hearings. Therefore, there are no ground to differ from the Report of the DGAP in this regard as also in the computation of profiteering made in the DGAP's Report. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the Respondent has neither been benefited from additional ITC nor has there been a reduction in the tax rate in the post-GST period. The allegation that the Respondent has not passed on the benefit of ITC in this case is not sustainable - the application filed by the Applicant No. 1 requesting action against the Respondent for alleged violation of the provisions of the Section 171 of the CGST Act is not maintainable and hence the same is dismissed.

Summary

Issues Involved:
1. Violation of Section 171 of the CGST Act, 2017.
2. Quantum of profiteering.

Issue-wise Detailed Analysis:

1. Violation of Section 171 of the CGST Act, 2017:

The main issue was whether the Respondent had passed on the benefit of Input Tax Credit (ITC) to the Applicant as required by Section 171 of the CGST Act, 2017. The DGAP conducted a detailed investigation and found that the Respondent had not benefited from additional ITC post-GST implementation. The ITC as a percentage of turnover available during the pre-GST period (April 2016 to June 2017) was 0.30%, and during the post-GST period (July 2017 to December 2018), it was 0.20%. Hence, there was no net benefit of ITC with the introduction of GST. The DGAP concluded that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period. The Authority agreed with the DGAP's findings, noting that the provisions of Section 171 of the CGST Act, 2017, were not liable to be invoked in this case.

2. Quantum of Profiteering:

The investigation also focused on determining the quantum of profiteering, if any. The DGAP's report indicated that there was no profiteering as the ratio of ITC to turnover in the post-GST period was lower than in the pre-GST period. The Respondent had issued a credit note to the Applicant, which indicated that an amount of ?1,12,080/- was being passed on to him. However, this was based on a provisional computation and was not substantiated during the hearings. The Authority found no grounds to differ from the DGAP's report and concluded that the allegation that the Respondent had not passed on the benefit of ITC was not sustainable.

Conclusion:

The Authority concluded that the instant case did not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017, as the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period. Accordingly, the application filed by the Applicant requesting action against the Respondent for alleged violation of the provisions of Section 171 of the CGST Act was dismissed. A copy of the order was sent to the Applicants and the Respondent free of cost.