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TMI Blog2019 (6) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... However no documents have been submitted to establish the credentials of the worksheet filed by him. The DGAP has correctly analysed the ITC ratio as 2.66% and applying this ratio to the payments made on or after 01.07.2017 the profiteered amount is determined as 99,20,246/-. This amount includes profiteered amount of 18,563/- to be paid to the Applicant No. 1 and 80,37,392/- to all the other 231 buyers. The Respondent has also to pass on the benefit of profiteered amount of 18,64,290/to the land owner who will in turn pass on the benefit to his buyers. Penalty - HELD THAT:- The Respondent has denied benefit of ITC to the buyers of the flats being constructed by him in his Project Laurel Heights in contravention of the provisions of Section 171 (1)(i) of the CGST Act, 2017 and has thus realized more price from them than what he was entitled to collect and has also compelled them to pay more GST on the additional realisation than what 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 under the provisions of the above Section - a Show C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued a notice dated 10.09.2018 to the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the notice as well as furnish all the supporting documents. Further the Respondent was also given an opportunity to inspect the non-confidential evidences/information submitted by the above Applicant which was not availed by him. The above Applicant was also given an opportunity to inspect the non-confidential documents/reply furnished by the Respondent which was not availed by him. 4. The DGAP on account of voluminous documents had sought extension of time for completing the investigation which was extended by this Authority vide its orders dated 27.11.2018 and 29.01.2019 in terms of Rule 129 (6) of the CGST Rules, 2017. The period of the investigation is from 01.07.2017 to 31.08.2018. 5. The DGAP in his report has stated that the Respondent had furnished the following documents:- (a) Copies of GSTR-1 returns for the period July, 2017 to August,2018. (b) Copies of GSTR-3B returns for the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,40,806 49,95,270 6. The DGAP has submitted that in the present case the project was complete and the completion certificate was also received by the Respondent on 07.03.2018. It was also noticed that the Respondent had availed ITC till June 2018 only and therefore the exact amount of ITC available to the Respondent was known and based on these facts the net ITC benefit to be passed on was to be calculated taking into account the fact that the credit on the unsold flats needed to be reversed since the completion certificate was already available. Accordingly the DGAP based on the total saleable area and the total ITC availed by the Respondent and the joint developer (Land Owner) arrived at proportionate credit of ₹ 2,56,93,110/- as shown in the Table C below:- Table - C Particulars Factor Post-GST Total Saleable Area of Flats including JDAs Share (in sq. ft) A 4,83,055 Area Sold before completion certificate is obtained (in sq. ft) B 4,08,613* Area sold before completion certificate is obtained (in Percentage) C=B/A 84.59% Area remaining Unsold before completion certificate is obtained (in sq. ft) D=A-B 74,442 Area remaining Unsold before completion cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per Home buyers list (G) 2,99,402 8 Relevant CENVAT/lnput Tax Credit (H) = (E*(G)/(F)] 1,34,09,324 9 Ratio of CENVAT/ Input Tax Credit to Turnover [(I)=(H)/(E)] 5.13% 7.79% 8. The DGAP has further submitted that the Central Government by Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 had levied 18% GST (effective rate was 12% in view of 1/3rd abatement on land value) on construction service. The DGAP based on these rates of tax and taking into consideration the ITC benefit available to the Respondent has arrived at the profiteered amount of ₹ 99,20,246/- as is given in the Table E below:- Table- E (Amount in Rs.) Sl. No. Particulars Pre-GST Post-GST 1 Period A 01 04.2016 to 30.06.2017 After 01.07.2017 2 Output tax rate on Construction (%) B 9.8 or 10 12 or 18 3 Ratio of CENVAT/ Input Tax Credit to Total Turnover as per Table - D above (%) C 5.13 7.79 4 Increase in input tax credit availed post-GST (%) D= 7.79% less 5.13% - 2.66 5 Analysis of Increase in input tax credit: 6 Outstanding BSP Amt. as on 30.06.2017 to be collected post-GST from customers who made bookings in Pre-GST period E 21,61,86,620 7 BSP Amt. (Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also submitted that the real estate business was market driven and the pricing of residential flats would be determined based on different parameters such as surrounding developments, facilities available like hospitals, schools, public transport, accessibility to railway station, airport and pricing of competitors etc. He has also stated the demand for homes and the supplier also placed a significant role in determining the cost of the flats. 12. The Respondent has further submitted that as a business practice his aim was to achieve an overall betterment in prices of flats which were sold over a period of 4 to 5 years from the date of launch of the project. He has further stated that the cost of construction of a flat became irrelevant in the pricing mechanism as there were factors which influenced the cost of the project. He has also claimed that his project 'Laurel Heights' was under composition scheme under the Karnataka VAT laws and was liable to Service Tax as per the Service Tax Laws. His project consisted of 434 units (total saleable area 4,83,055 sq. ft.) under the Joint Developer Agreement where he enjoyed 70.81% share and the land owner enjoyed 29.19% share. He has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi on the question of methodology adopted to compute the alleged profiteered amount. He has further claimed that in his case there was no effective increase in ITC benefit to be passed on to the buyers and the methodology adopted to determine profiteering needs to be revisited. He has also claimed that Section 171 of the CGST Act, 2017 should consider the increase in the cost of raw materials also. In view of the above the Respondent has requested to keep the proceeding in abeyance in as much as the Hon'ble High Court of Delhi in the case of Pyramid Infratech Pvt. Ltd. = 2019 (3) TMI 149 - DELHI HIGH COURT had stayed the proceedings questioning the methodology to calculate the quantum of profiteering. 15. The Respondent has also submitted that since the projects in the construction business were spread over a period of time there could not be a co-relation between the inward supplies and the input taxes. He has also stated that out of a total saleable area of 4,83,055 sq. ft. of the project in the year 2014-15 only 1,56,762 sq. ft., in the year 2015-16 61,474 sq. ft., in the year 2016-17 29,590 sq. ft. and in the year 2017-18 (till 07.03.2018) only 16 899 sq ft. was sold. Based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y requires that the benefit of ITC if any extended by the Government should be invariably passed on to the end consumer. The real estate business might be spread over a period of 4-5 years but it is also a fact that the flats are sold in instalments without waiting for completion of the project or the completion certificate. Hence the question of waiting endlessly to pass on the benefit of ITC to the buyer who has already paid the entire instalments is not justified and the provisions of the above section also do not provide that such benefit should be passed on completion of the project. It may also be emphasised that most of the real estate projects are not completed within the stipulated period of time. In the present case it's an admitted fact that the completion certificate has been received on 07.03.2018 and hence any flat sold after this period will not be liable to GST. Therefore the DGAP has rightly taken into account the estimated reversals on the unsold flats and accordingly arrived at the profiteered amount. Therefore the above contention of the Respondent is irrelevant and cannot be accepted. 18. The second contention of the Respondent is that in the case of Pyramid I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otiated and were reduced by ₹ 49,85,249/- which works out to ₹ 9/- per sq. ft. However no documents have been submitted to establish the credentials of the worksheet filed by him. Moreover a project includes common area and the facilities provided in the common area are also eligible for the benefit of the ITC. Other factors such as GST benefit have also not been taken into account for arriving at this calculation. Therefore the right methodology would be to take into account the ITC ratio to the turnover and accordingly arrive at the benefit of ITC to be derived by the Respondent. The DGAP has correctly analysed the ITC ratio as 2.66% and applying this ratio to the payments made on or after 01.07.2017 the profiteered amount is determined as ₹ 99,20,246/-. This amount includes profiteered amount of ₹ 18,563/- to be paid to the Applicant No. 1 and ₹ 80,37,392/- to all the other 231 buyers. The Respondent has also to pass on the benefit of profiteered amount of ₹ 18,64,290/to the land owner who will in turn pass on the benefit to his buyers. 21. In view of the above facts this Authority under Rule 133 (3) (a) of the CGST Rules, 2017 orders that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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