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TMI Blog2019 (7) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 to the Standing Committee on Anti-Profiteering under Rule 128 of the CGST Rules, 2017. The Applicant No. 1 had stated in his application that the Respondent had resorted to profiteering in respect of supply of construction services related to purchase of an apartment in the project "Independent Floor Phase-II" at Plot No. 18, Ground Floor, Street No. F 3.1, Sector-82, Vatika India Next, Gurugram-122004. The Applicant No. 1 had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price of the apartment purchased by him, on implementation of GST w.e.f. 01.07.2017. The said application was examined by Haryana State Screening Committee in its meeting held on 20.06.2018 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 of the CGST Act, 2017 and forwarded the same with its recommendation to the Standing Committee on Anti-Profiteering for further action in terms of Rule 128 of the CGST Rules, 2017. The said application was examined by the Standing Committee on Anti-Profiteering in its meeting held on 07.08.2018 & 08.08.2018 and it had referred the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect "Independent Floor Phase-II" was completed prior to 01.07.2017 and that he had neither availed ITC on any of its inputs procured in the GST regime, nor did he avail/carry forward the pre-GST credit pertaining to the stock held in hand as on 30.06.2017. Further, in reply to the allegation of Applicant No. 2 regarding collection of Service Tax from the previous allottee of the Unit No. 48, Ground Floor, S-1, Sector-82, Vatika India Next, the Respondent submitted that the Applicant No. 2 was the first allottee of the said unit and it was never allotted to anyone before him. The Respondent had also submitted the following documents for the period July-2017 to August-2018 for all the projects related to the Applicant No. 1 and 2 a. Copies of GSTR-1 returns. b. Copies of GSTR-3B returns. c. Copies of Tran-1 returns in respect of transitional credit availed. d. Copies of VAT & ST-3 returns. e. Electronic Credit ledger. f. Copies of all demand letters and sale agreement/contract and construction agreement. g. Tax rates- pre-GST and post-GST. h. copy of Balance Sheet for FY 2016-17 & 2017-18. i. Details of turnover and ITC for the project "Independent Floor Phase-II". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made to the Respondent in this regard, and the Respondent assured to commence the work. All these payments including GST as demanded by the Respondent were paid. The Respondent had been demanding the payment from the buyers even without construction of flat on Plot No. 18, Street F-3.1, EMillia Floor, Sector-82, Gurgoan. He has also attached copies of e-mails from other aggrieved buyers. b. Further, a demand for an amount of Rs. 2,33,660/- including GST @ 18% was raised by the Respondent on offer of possession, although the flat was not ready. However, the same was paid to the Respondent. The Respondent handed over the keys of the property without any OC/registration. c. The Applicant No. 1 also stated that the construction of the flat was carried out by the builder post-GST regime and GST @18% was charged against various stages of construction and a substantial amount on account of GST had been charged. He also stated that besides GST, an amount of Rs. 10,662/- was also charged as VAT in September-2017 which increased the cost of property contrary to the claim made by Government of India that cost of under construction housing has reduced after implementation of GST. d. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an alternative unit. f) On his visit to Vatika office, he was offered re-allotment of a dwelling unit in a proposed multi-storey cluster. Considering certain serious drawbacks in the offer for re-allotment, he had declined the offer. g) He visited Vatika office again on 3.10.2017 when he was offered for re-allotment of Unit 48, GF, S-1, Sector 82, Vatika India Next (the Apartment), in lieu of the Independent Floor assigned to him by Mrs. Maya Pruthi, which was accepted by him. h) He enquired from the concerned executive the reason for which the Apartment was not offered to him when he visited earlier on 20.7.2017. He was informed that the Apartment had become available after 20.7.2017 on cancellation of allotment of the person who was originally allotted the Apartment (original allottee). i) The Apartment was finally allotted to him on 02.11.2017. j) On 09.11.2017, he received 4 invoices all dated 7.11.2017, with a total demand of (including GST of Rs. 2,36,087.20). The details of the demands are as under: Invoice No. Due GST Total State 1/104/1718/00077 393478.68 47217.44 440696.12 On completion of Foundation 1/104/1718/00078 590218.02 70826.16 661044.18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, the taxes, duties etc that are levied on the Vatika India Next complex as a whole are reimbursable under Clause 2 of the Builder Buyer Agreement. p) Since GST is levied ad valorem and not based on the built-up area of the Apartment, reimbursement of GST based on the built-up area is not contemplated under Clause 2 of the Builder Buyer Agreement. q) The Service Tax was in force in April 2011 when the BBA was executed. Yet there was no mention of its recovery in Clause 2 which mentioned the property tax, wealth tax etc. r) In this view of the matter, GST, like other taxes such as Central Excise Duty, Central Sales Tax, State Sales Tax, VAT, entry tax, municipal taxes etc. which are not included in Clause 2 of the BBA, is to be borne by the Respondent. s) It is very pertinent to state that the taxes were not recovered separately before the GST regime and were borne by the Respondent itself since they were not covered under clause 2 of the BBA. For parity of reasoning, there can be no occasion the Respondent to recover GST. t) The recovery of GST from him by the Respondent beyond the terms of BBA amounts to unjust enrichment and is therefore Anti-Profiteering act of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g February 2016 to September 2016. On completion of these 4 stages, invoices, including the Service Tax would have been issued to the original allottee. aa) The services supplied to him in November 2017 were the same as earlier supplied to the original allottee during 2016, for which the Service Tax/GST was recovered from the original allottee. bb) It is an established principle of taxation that a single transaction cannot be subjected to taxation twice (double taxation). By invoking this principle, the Respondent could not have collected GST from him on re-allotment of the Apartment. cc) The legislative policy to avoid double taxation has been incorporated in subsection (11) of Section 142 of the CGST Act, 2017. dd) The Service Tax was leviable under Chapter V of the Finance Act, 1994, as amended from time to time, during 2016 invoices would have been issued to the original allottee on completion of above noted 4 stages of construction. ee) The charging provision for GST in relation to services supplied after 1.7.2017 is governed under sub-section (1) of Section 13 of the GST Act, as extracted below: "13. (1) The liability to pay tax on services shall arise at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.12.2017 on its Client Service Portal, he had sought benefit of ITC and adjustment of the excess recovery made from him. The Respondent in its reply sent under email dated 29.12.2017 informed him that ITC was being worked upon and he would be informed of its applicability. pp) In reply to his next email dated 14.3.2018 to the Respondent seeking adjustment of ITC, he received a reply email dated 19.3.2018 informing that the work was under process. qq) He sent a letter dated 22.5.2018 seeking expeditious settlement and adjustment of ITC. In reply to the said letter dated 22.5.2018 he was informed by the Respondent by email dated 23.5.2018 as under: ".........we would like to inform you that under Section 171 of CGST Act provides that 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. However the exact methodology and the procedure to be followed for arriving at the benefit if any on account of Input Tax Credit for the purpose of passing on the benefit in the form of reduction in prices have not yet been notified in the public domain, whenever the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITC availed by the Respondent as a percentage of the Respondent's total turnover, both in the pre-GST and post-GST period, has been worked out and compared to determine whether there was any additional benefit of any ITC in the post-GST period. As the Respondent submitted that he had not availed any ITC in the post-GST period, there could not be any additional benefit of ITC available to the Respondent after implementation of the GST w.e.f. 01.07.2017. The Respondent had charged GST @ on construction services 18% on 2/3d of the demand raised post-GST because the payment of GST would depend on the time of supply of service, in terms of Section 13 of CGST Act, 2017 and the Respondent had raised the demand in the post-GST period. 10. A sitting of the Authority was held on 09th April, 2019, wherein it was decided to accord an opportunity of hearing to the Applicants and the Respondent on 29.04.2019. The Respondent in his reply dated 29.04.2019 has made the following submissions in writing:- a. The project in which bookings were made by the Applicants No. 1 & 2 was already completed by 30th June, 2017. Copy of the completion certificate issued by Chartered Engineer was also en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. On this issue it has been revealed from the DGAP's Report that no ITC has been availed by the Respondent in the post-GST period and therefore, there was no additional benefit of ITC which had accrued to the Respondent post-GST as compared to pre-GST period. In view of the fact that there was no reduction in the rate of tax nor there was increased additional benefit on account of ITC, the provisions of Section 171 of CGST Act, 2017 could not be invoked in this case. 14. The contentions of Applicant No. 1 mainly stress upon the fact that the construction was not completed before the GST had come into force and the payment was made by him in the GST regime along with GST. He had also alleged that the Respondent had not passed on the benefit of ITC. It can be concluded that none of his contentions fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the Respondent had not availed any ITC in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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