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2022 (5) TMI 1417 - NAPA - GSTProfiteering - purchased a flat in the Respondent's project - allegation is that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the prices - contravention of section 171 of CGST Act - penalty - HELD THAT - It is clear from the plain reading of Section 171 (1) that, it deals with two situations - one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. 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 hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. It is admitted fact that project was started in pre-GST period and several bookings/payments were made in the pre-GST period. The DGAP's Report reveals that CENVAT. as a percentage of the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 0.00%. whereas, during the post-GST period (July-2017 to March-2019), it was 1.85%. This confirms that in the post-GST period, the Respondent has been benefited from additional ITC to the tune of 1.85% 1.85% - 0.00% of his turnover and the same was required to be passed on by him to the eligible flat buyers, including the Applicant No. 1. The amount of profiteering computed by the DGAP is hereby accepted as correct. The said profiteered amount is to be passed on to the said home buyers along with interest @ 18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in accordance with the provisions of Rule 133 (3) (b) of the CGST Rules, 2017 - this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the home buyers commensurate with the benefit of ITC received by him. Penalty - HELD THAT - The provisions of Section 171 (3A) of the CGST Act, 2017 have been inserted in the CGST Act, 2017 vide Section 112 of the Finance Act, 2019, and the same became operational w.e.f. 01.01.2020. Though the period of investigation was 01.07.2017 to 30.09.2020, however, the amount profiteered as determined above relates to the period from 1.07.2017 to 31.03.2019 only, as the Respondent had not profiteered after such date on account of the option exercised by him, under the Scheme issued vide Notification No. 03/2019-Central Tax (Rate) dated 29.03.2019, as detailed above. Therefore, the penal provisions under Section 171 (3A) are not applicable in this case as they cannot be made applicable retrospectively. Also, this Order falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.
Issues Involved:
1. Alleged profiteering by not passing on the benefit of Input Tax Credit (ITC) to customers. 2. Determination of whether there was a benefit of reduction in tax rate or ITC post-GST implementation. 3. Calculation and verification of the profiteered amount. 4. Compliance with Section 171 of the CGST Act, 2017. 5. Applicability of penal provisions under Section 171 (3A) of the CGST Act, 2017. Issue-wise Detailed Analysis: 1. Alleged Profiteering by Not Passing on ITC Benefit: The Applicant No. 1 filed a complaint under Rule 128 (1) of the CGST Rules, 2017, alleging that the Respondent did not pass on the benefit of ITC by way of commensurate reduction in prices for a flat purchased in the "Venice Bungalows" project. The Director General of Anti-Profiteering (DGAP) conducted a detailed investigation as per Rule 129 (6) of the CGST Rules, 2017, and submitted a report on 25.03.2021. 2. Determination of Benefit of Reduction in Tax Rate or ITC Post-GST: The DGAP's investigation focused on whether there was a benefit of reduction in tax rate or ITC on the supply of construction services after the implementation of GST from 01.07.2017. It was found that the Respondent was eligible to avail ITC of GST paid on inputs and input services post-GST. The investigation period covered from 01.07.2017 to 30.09.2020, but the computation of profiteering was limited to the period up to 31.03.2019, as the Respondent opted for a new scheme with a 5% GST rate without ITC from 01.04.2019. 3. Calculation and Verification of the Profiteered Amount: The DGAP's report revealed that the Respondent benefited from additional ITC to the tune of 1.85% of the turnover post-GST. The Respondent had not passed on this benefit to the recipients, resulting in a profiteering amount of Rs. 4,31,473/-. The calculation was based on the comparison of ITC ratios pre-GST (0.00%) and post-GST (1.85%) and the turnover figures provided by the Respondent. The Respondent agreed to the computation and confirmed the payment of the profiteered amount along with 18% interest to the affected homebuyers. 4. Compliance with Section 171 of the CGST Act, 2017: Section 171 (1) of the CGST Act, 2017 mandates that any reduction in the tax rate or benefit of ITC must be passed on to the recipient by way of commensurate reduction in prices. The DGAP's report and the Authority's order confirmed that the Respondent contravened this provision by not passing on the ITC benefit. The Respondent was directed to reduce prices commensurate with the ITC benefit and pass on the profiteered amount along with interest to the eligible buyers. 5. Applicability of Penal Provisions Under Section 171 (3A) of the CGST Act, 2017: The penal provisions under Section 171 (3A) of the CGST Act, 2017, which became operational from 01.01.2020, were not applicable in this case as the profiteering occurred before this date. Therefore, no penalty was imposed on the Respondent. Conclusion: The Authority accepted the DGAP's computation of the profiteered amount and directed the Respondent to pass on the benefit of Rs. 4,31,473/- along with 18% interest to the affected homebuyers. The Respondent complied with this order and submitted documentary evidence of the payments made. The concerned GST Commissioner was directed to verify the compliance and submit a report within four months. The order was issued within the extended limitation period due to the Covid-19 pandemic.
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