2020 (12) TMI 1040 - NAPA - GST

Profiteering - allegation that the benefit of reduction in the rate of tax and the benefit of Input Tax Credit which was required to be passed on to the eligible recipients as per the provisions of section 171 (1) of the Central Goods Service Tax (CGST) Act, 2017, not passed on - HELD THAT - 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, i.e. after 2017. Hence, the only issue to be examined is whether there was any benefit of ITC to the Respondent upon the introduction of GST. The DGAP has reported that the Respondent had obtained the Commencement Certificate (CC) for the project Golf Meadows Godrej City, Panvel (Phase-II) on 07.09.2018 and for the project EWS on 11.05.2018. The DGAP has also verified that the project Golf Meadows Godrej City, Panvel (Phase-II) was registered on 11.10.2018 by Maharashtra RERA and the first booking in the above project was made on 02.11.2018. The DGAP has further observed that the project EWS was not registered under Maharashtra RERA and the Respondent had not sold any EWS unit as of 31.12.2019. The DGAP has further found that the projects Golf Meadows Godrej City, Panvel (Phase-Il) and EWS had been launched in the post-GST regime and there was no price history of the units sold in the pre-GST regime that could be compared with the post-GST base prices to establish whether there was any profiteering by the Respondent or not. In terms of the provisions of the RERA Act, bookings in the project could not happen till the registration was obtained. Since the registration was obtained for the subject projects post the introduction of Goods and Services Tax only, the provisions of Section 171 dealing with Anti-profiteering could not be made applicable to the said project in the view of the fact that there was no additional ITC that had been utilized by him, which was relevant for establishing any allegation of profiteering. The DGAP has reported that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period and therefore it did not qualify to be a case of profiteering - the instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. The proceedings are dropped.

Summary

Issues:
1) Whether there was a violation of the provisions of Section 171 of the CGST Act, 2017 in this case?
2) If yes, then what was the quantum of profiteering?

Analysis:

Issue 1: Violation of Section 171 of the CGST Act, 2017
The case involved an investigation by the Director-General of Anti-Profiteering (DGAP) under Rule 129(6) of the CGST Rules, 2017 to determine if the Respondent had availed the benefit of Input Tax Credit (ITC) that should have been passed on to eligible recipients as per Section 171(1) of the CGST Act, 2017. The Respondent contended that the anti-profiteering provisions did not apply to the projects in question as they were launched post-GST implementation. The DGAP examined various documents and evidence to establish if there were benefits of reduction in tax rates or ITC on construction services provided by the Respondent post-GST implementation.

Issue 2: Quantum of Profiteering
The DGAP reported that no profiteering was found in the investigated projects as all events such as project launches, bookings, and allotments occurred in the post-GST era. The Respondent had not benefited from additional ITC nor had there been a reduction in tax rates post-GST implementation. The DGAP concluded that the Respondent did not contravene Section 171 of the CGST Act, 2017. The Authority concurred with the DGAP's findings and determined that the case did not fall under the ambit of anti-profiteering provisions, leading to the proceedings being dropped as per Order No. 78/2019.

In conclusion, the judgment highlighted the thorough investigation conducted by the DGAP, the lack of evidence supporting profiteering allegations, and the compliance of the Respondent with GST regulations. The decision was made based on a detailed analysis of the facts and legal provisions, ultimately leading to the dismissal of the anti-profiteering case against the Respondent.