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TMI Blog2018 (9) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... l as when the tax was levied at @ 8% - Held that:- The Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that the Respondent shall reduce the price to be realized from the buyers of the flats in commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 28.02.2018 any benefit of ITC which shall accrue subsequently shall also be passed on to the buyers by the Respondent. He shall not only pass on the benefit as has been mentioned above to the 109 Applicants who are before us but to all the 2476 buyers as they are identifiable. Respondent is further directed to refund or reduce the amount, to the extent calculated above to each and every buyer at the time of collecting the last installment along with the interest @ 18% per annum to be calculated from the date of the receipt of the excess amount from each buyer, within a period of 3 months from the date of receipt of this order. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otra* [email protected] 8 Neeraj Dale* [email protected] 9 Kuldeep Maan [email protected] 10 Alok Tyagi* [email protected] 11 Mayank Saxena [email protected] 12 Yogesh Upadhyay [email protected] 13 Parteek Sharma* [email protected] 14 Kamal Valecha* [email protected] 15 Narottam Singh* [email protected] 16 Rahul Kapoor* [email protected] 17 Vinod Khanduja* [email protected] 18 Pradeep Jangra* [email protected] 19 Amarjeet Kumar* [email protected] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was much more than the output tax liability of the Respondent had not been passed on to them and therefore the Applicants should not have been burdened with the entire GST of 12% or 8%. They had further alleged that the Respondent had not agreed with the contention of the Applicants that the Respondent was charging 12% and 8% GST and was simultaneously also enjoying the benefit of ITC and was not giving the benefit of the ITC, had claimed that the Respondent was contravening the provisions of Section 171 of the CGST Act, 2017. Accordingly they had filed several applications with the Haryana Screening Committee for appropriate redressal of their grievance. These applications were examined by the Screening Committee in its meeting held on 30.10.2017 and it was decided to forward these applications to the Standing Committee on Anti-profiteering for further necessary action. The Standing Committee in its meeting held on 07.11.2017 after confirming that prima facie there was evidence of non-compliance of the provisions of Section 171, had forwarded these applications to the Director General of safeguards (DGSG) now redesignated as Director General of Antiprofiteering(DGAP) for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anil Dwivedi* [email protected] 23 Ravi Gumber [email protected] 24 Praveen Kumar Sharma [email protected] 25 Abhishek Yadav [email protected] 26 Ashish Gupta [email protected] 27 Rahul Rajoriya [email protected] 28 Gagan Batra [email protected] 29 Manisha Jain [email protected] 30 Parvesh Chopra [email protected] 31 Rakesh Yadav [email protected] 32 Sunil Saini [email protected] 33 Raj Kumar* [email protected] 34 Ankur Chawla [email protected] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60 Shamik Singha Roy [email protected] 61 Smitha Sreekumar jofinmathew @gmail.com 62 Gaurav Kumar* [email protected] 63 Rohit Chopra [email protected] 64 Ashutosh Fotedar [email protected] 65 Kapil Aggarwal [email protected] 66 Gaurav Singla [email protected] 67 Pankaj Kumar [email protected] 68 Sandeep Sharma [email protected] 69 Kiran Mishra [email protected] 70 Saurabh Jain [email protected] 71 Nitesh Rohilla* [email protected] 72 Rajdee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97 Kilanoor Ganeshan Mudallar [email protected] 98 Deepak Jain [email protected] 99 Deepak Fialok* [email protected] 100 Gagan Nagpal [email protected] 101 Abhishek Kapoor [email protected] 102 Yogesh Kumar [email protected] *Applicants who have filed more than one application. 3. The Director General Anti-Profiteering (DGAP), after completing the investigation has submitted his Report under Rule 129 (6) of the CGST Rules, 2017 on 24.05.2018 followed by his subsequent reports submitted on 01.08.2018 and 28.08.2018. The Report of the DGAP mentions 109 Applicants out of the 138 Applicants out of which in as much as 26 have filed duplicate applications and 2 have submitted triplicate applications. 4. The DGAP in his report has stated that a notice was issued to the Respondent under Rule 129 of the CGST Rules, 2017 to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (CST) For material 12,04,661/- for capital goods 24,47,563/- Total ₹ 36,52,224/- 4 Total ITC (1+2+3) 2,88,94,450/- 5 ITC part of Cost 46,91,507/- + 12,04,661/-=58,96,168/- 6 Cost of Sale (before interest) 50,44,57,118/- 7 Interest 44,83,288/- 8 Cost of Sale after interest (6+7) 50,89,40,406/- 9 Net Sales Realization 1,21,79,69,823/- 10 Profit (9-8) 70,90,29,416/- 11 Percentage of ITC to Sales Realization (4 as % of 9) 2.37% 6. The report also submits that the Respondent had claimed that the provisions of Section 171 of the CGST Act, 2017 were not applicable in as much as there was no reduction in the rate of tax as earlier the Affordable Housing Schemes (AHS) executed under the Affordable Housing Policy 2013 (here-in-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 111788 2 within 15 days of allotment 15-09-2015 20% 412728 14445 21668 0 0 448841 3 Within 6 months of allotment 15-03-2016 12.50% 257955 0 13543 0 0 271498 4 Within 12 months of allotment 15-09-2016 12.50% 257955 0 13543 0 0 271498 5 Within 18 months of allotment 15-03-2017 12.50% 257955 0 13543 0 0 271498 6 Within 24 months of allotment 15-09-2017 12.50% 257955 0 0 15477 15477 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions of the Respondent that the net taxable value for the year 2016-17 was ₹ 1,64,52,87,429/- on which VAT liability on him was ₹ 14,91,04,173/-, the DGAP has estimated the VAT liability of the Respondent as 9% of the net taxable value (abated value) and 5.098% of the gross amount of ₹ 2,92,49,55,429/- received from the Applicants. 11. The DGAP has also reported that on examination of the GSTR-3B Returns filed by the Respondent it was revealed that the ratio between the taxable turnover and the ITC availed by him in the post-GST era w.e.f. July 2017 to February 2018 was 7.20%. 12. The DGAP has also mentioned that the Central Government had imposed 18% GST with effective rate of 12% in view of 1/3rd abatement on value on the Construction Service vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and the GST rate on the above Service in respect of the Affordable Housing Schemes was reduced to 8% vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. The DGAP has also analyzed the issue of profiteering for the pre-GST period from April 2016 to June 2017 when VAT was payable @ 5.25% and the post-GST period from July 2017 to J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able turnover and thus there was additional benefit of ITC to the tune of 6.10% (7.20%-1.10%) in the post-GST era, covering the period from July 2017 to February 2018 to the Respondent. The DGAP has also stated that for the period w.e.f. 01.07.2017 to 24.01.2018 while the additional ITC available was 6.10% of the taxable turnover, the tax rate had increased by 6.75 % (12%-5.25%), leaving no benefit of ITC to be passed on to the Applicants. On the other hand, during the period between 25.01.2018 to February, 2018, the additional ITC of 6.10% of the taxable turnover was more than the increase in the tax rate by 2.75% (8%5.25%), requiring the Respondent to pass on the benefit of additional ITC of 3.35% (6.10%-2.75%) of the taxable turnover to the Applicants by way of commensurate reduction in the price of the flats. The DGAP has further reported that there was no violation of the provisions of Section 171 of the above Act during the period between 01.07.2017 to 24.01.2018 when the GST was leviable @ 12% but there was violation when the GST was reduced to 8% w.e.f. 25.01.2018 to February, 2018 as the Respondent had not passed on the net benefit of ITC to the Applicants which had accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als and External Development Charges (EDC) was required to be incurred before start of the construction and hence the initial payments on application, allotment and few periodical installments were meant for funding the above mentioned costs which on an average amounted to 40-45% of the total revenue from the Applicants. The Respondent has also claimed that the percentage of expenditure on construction was far more than the percentage of collections made from the Applicants. He has also argued that besides construction cost there were other expenses as had been mentioned above which needed to be considered before arriving at the profit margin. 16. The Respondent has further submitted that though the benefit of ITC was made available, the basic cost of the raw material had increased abnormally which had resulted in setting off of the benefit of ITC. the Respondent has also claimed that in the post-GST period basic cost of Steel was higher than the cost of Steel during the pre-GST period which had resulted in extra expenditure of ₹ 4,34,80,082/- while the ITC amounted to only ₹ 3,97,12,844/- which was much less than the increase in the price of Steel, hence, the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earings held on 23.07.2018 01.08.2018. While some of the Applicants filed written submissions on 23.07.2018 and 01.08.2018, the other applicants made their submissions through e-mails dated 17.07.2018, 26.07.2018, 31.07.2018, 06.08.2018, 07.08.2018, 08.08.2018 and 30.08.2018. The written and oral submissions made by the Applicants are summarized below:- 21. The Applicants did not agree with the DGAP s report which stated that the profiteering was only to the extent of 3.35%. They claimed that the amount of profiteering was 6.10%. They also claimed that the Respondent had recovered VAT @ 5.25% from the Applicants but had paid the Government @ 5.09%. They also requested for imposition of penalty and for early disposal of the case so that the benefit if any was provided to them before the last installment was paid to the Respondent. 22. They also claimed that the increase or decrease in cost on account of the factors other than tax rate and ITC was not to be considered for the purpose of profiteering. They further claimed that the maximum rate of ₹ 4,000/- per sq. ft. carpet area was fixed and any escalation in the cost had already been taken into account at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 273 per sq. ft. Profiteering in % terms = 6.1%. During the period between 25.01.2018 to 28.02.2018 the actual benefit to the Applicants in % was ₹ 273/4,000 = 6.825% Re-calibrated rate ₹ 4,056 (Rs. 3,756 +8% GST) Already billed and collected rate ₹ 4,320 (including 8% GST) Effective rate to be returned to the Home Buyers ₹ 264 per sq. ft. Profiteering in % terms = 6.1% Actual benefit to the Applicants in %age 264/4,000 = 6.6% 27. Accordingly, the Applicants have prayed that appropriate amount may be allowed to be refunded by the Respondent along with interest @ 18% p.a. for the period the extra amount had remained with him to all the buyers irrespective of the number of the Applicants who had filed complaints as all the buyers were identifiable. 28. The Authority had sought certain clarifications based on the submissions made by the Applicants and the Respondent and in reply to the letter dated 11th June, 2018 and the directions given during the hearing held on 23rd July, 2018, the DGAP in his reply dated 1st August, 2018 has submitted that for the period before 01.07.2017 the output rate of VAT on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Report, the written and oral submissions of both the Applicants and the Respondent placed on record. The issues to be decided by the Authority are as under:- (a.) Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 in this case? (b.) If yes then what was the quantum of profiteering? 30. Perusal of Section 171 of the CGST Act shows that it provides as under:- 171. (1) Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. (2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. (3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. 171. (1) It is very clear from the reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building plans. c. Low Potential Towns ₹ 3000/ - per sq. ft. Based on the above Policy the Respondent had submitted his Project Report to the RERA stating that the maximum sale price for each flat would be ₹ 4000/- per sq. ft. carpet area. Therefore, the claim of the Respondent that the price was fixed at ₹ 4000/- by the Haryana Government is incorrect as he had himself made offer of selling the flats at the above rate. It is also clear from the perusal of the above para that the above price was the maximum price and there was no restriction on the Respondent to charge less price. The Respondent had chosen to collect the maximum rate fixed by the Policy and therefore his plea that the rate reduction was not possible was not correct. Moreover the rate offered by the Respondent did not include taxes and it is a fact that the Applicants had paid 5.25% VAT in the pre-GST era and GST @ 12% and 8% for the period between 01.7.2017 onwards. The Buyer s Agreement vide paras 4.1, 5.3 and 5.5 clearly indicates that the Applicants were liable to pay all the taxes as applicable. Para 5.3 of the agreement st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to the extent of 25% meaning thereby that the balance amount had been utilized by the Respondent in his business and no interest had been paid by him on this amount to the Applicants. It is also apparent from the returns that when compared to the pre- GST period where 86% of the tax liability was paid in cash after availing ITC, in the post GST period the entire amount of tax liability had been paid through ITC, which shows that the entire 12% GST liability was paid through ITC while 12% GST was being collected by him from the Applicants. Therefore this Authority is of the view that the ratio of the ITC to the taxable turnover calculated by the DGAP is correct and the Respondent has not placed any concrete facts or reasons on record to dispute the same. 33. The Respondent has pleaded that since the cost of Steel one of the major raw materials had increased this increase should have been accounted for before alleging profiteering. This argument of the Respondent is not tenable since he had himself offered the maximum price of ₹ 4000/- and there was no provision of revision of this price on the basis of escalation in the price of the raw material in the Policy. The App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puts were now available at the reduced rates. 35. From the above narration of facts it is absolutely clear that the excess ITC was available to the Respondent the benefit of which he was required to pass on to the Applicants. The Respondent cannot appropriate this benefit as this is a concession given by the Government from it s own tax revenue to reduce the prices being charged by the builders from the vulnerable section of society which cannot afford high value apartments. The Respondent is not being asked to extend this benefit out of his own account and he is only liable to pass on the benefit of ITC to which he has become entitled by virtue of the grant of ITC on the Construction Service by the Government. 36. The second issue which is required is to be settled is that what was the extent of the profiteering. The DGAP had originally reported that the profiteering was nil for the period from July, 2017 to January, 2018 and 3.35% for the period between 26th January, 2018 to February, 2018 if the tax was levied @ 12% 8% respectively. However the Applicants had disputed these calculations and submitted that the actual benefit that the Respondent has to pass on to all of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 Profiteering for Other than Applicants February, 2018 3,04,54,665 Total Profiteering 8,13,40,831 37. The DGAP has arrived at the above figures of profiteering based on the turnover for the period between 01.07.2017 to 24.01.2018 and the amount of installments for the period of 25.01.2018 to 28.02.2018. Accordingly, he has arrived at the profiteering amount of ₹ 8,13,40,831/-. However, the Authority has taken the basic principle followed by the DGAP i.e. 6.1% of profiteering and accordingly the amount of profiteering has been calculated for each type of flat to arrive at the profiteering amount for each and every buyer depending upon the type of flat he has purchased. In view of the above the Authority determines the amount of profiteering as ₹ 8,22,80,998/- for all the 2476 flats. 38. The DGAP has calculated the profiteering @ 6.1% on the base price of ₹ 4000/- per sq. ft. and accordingly calculated tax amount on the reduced payment. The calculations made by the DGAP are placed below which are correct and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 them to pay more GST than that they were required to pay by issuing incorrect tax invoices and hence he has committed an offence under section 122 (1) (i) of the CGST Act, 2017 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 122 of the above Act read with rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. 42. Further, the Authority, as per Rule 136 of the CGST Rules 2017 directs the Commissioner of State Tax Haryana to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by the Authority is passed on to the all the buyers. A report in compliance of this order shall be submitted to this Authority by the Commissioner within a period of 4 months from the date of receipt of this order. A copy each of this order be supplied to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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