9911796707
TMI Blog2019 (12) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1 had alleged profiteering by the Respondent in respect of purchase of Flat at AMALFI-2603, House of Hiranandani, 5-63 OMR, Egattur, Chennai-600130. The above Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by him by way of commensurate reduction in the price of the above flat. The Tamil Nadu State Screening Committee on Anti-profiteering had prima facie found that the Respondent had not passed on the benefit of ITC to the above Applicant as the same should have been computed against the instalments paid by the Applicant No. 1 against the price of the flat. The above Screening Committee had forwarded the said application with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 (2) of the above Rules. The aforesaid reference was considered by the Standing Committee on Anti-profiteering, in its meetings held on 07th & 08th August, 2018, wherein it was decided to forward the same to the DGAP to conduct detailed investigation in to the complaint according to Rule 129 (1) of the CGST Rules, 2017. 2. The Applicant had furnished the following documents along with his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was availing the credit of GST paid on inputs and input services and paying 12% GST on the sale value of the flats. b) That the benefit of TRAN-1 credit under Section 140 of the Central Goods and Services Tax Act, 2017 and the benefit available under Section 142 (11) (c) of the said Act were not available to him. Further, the credit of Central Excise Duty paid on inputs was not available prior to GST but the same was admissible under the GST, the benefit of which was to be calculated and passed on to the customers at the time of handing over the possession of the flats after the completion of the project. c) That the agreements for sale of flats entered into between the buyers and the Respondent had specified the milestones for recovery of the amount. The invoice could be raised only on achieving the milestone when the credit had been accruing on incurring the expenditure on construction. Therefore, there was no synchronization between the accrual of credit and the receipt of consideration for service during any period. In Amalfi project, Slab 35 had been cast in November, 2017 and the demand was raised in December, 2017. After Slab 35, as per the schedule of payment, the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ITC once the CC has been received. 6. The Respondent had also submitted the following documents/information to the DGAP vide his above mentioned letters/e-mails during the course of the investigation:- (a) Copies of GSTR-1 Returns for the period from July, 2017 to August, 2018. (b) Copies of GSTR-3B Returns for the period from July, 2017 to August, 2018. (c) Copies of VAT & ST-3 Returns for the period from April, 2016 to June, 2017. (d) Electronic Credit ledger for the period from July, 2017 to August, 2018. (e) Copies of all demand letters, receipts and sale agreement/ in the name of the Applicant Sh. Kavi Mahajan. (f) Details of applicable Tax rates- pre-GST and post-GST. (g) Balance Sheet for the FY 2016-17. (h) Copy of project report submitted to RERA. (i) Details of taxable turnover and input tax credit for the project "AMALFI". (j) List of home buyers in the project "AMALFI". 7. The DGAP has also stated that all the documents placed on record were carefully examined by him and he had found that the main issues for determination were whether there was reduction in the rate of tax or benefit of ITC on the supply of construction service by the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 - - 165,209 165,209 22. Billing Slab 27 7/29/2017 27-08-2017 158,095 - - 18.971 177,066 177,066 23. Billing Slab 28 8/1/2017 30-08-2017 158,095 - - 18.971 177,066 177,066 24. Billing Slab 29 8/4/2017 02-09-2017 158,095 - - 18.971 177,066 177,066 25. Billing Slab 30 8/19/2017 17-09-2017 158,095 - - 18.971 177,066 177,066 26. Billing Slab 31 8/31/2017 29-09-2017 158,095 - - 18.971 177,066 177,066 27. Billing Slab 32 9/26/2017 25-10-2017 158,095 - - 18.971 177,066 177,066 28. Billing Slab 33 10/13/2017 11-11-2017 158,095 - - 18.971 177,066 177,066 29. Billing Slab 34 11/21/2017 20-12-2017 158,095 - - 18.971 177,066 177,066 30. Billing Slab 35 12/1/2017 30-12-2017 158,095 - - 18.971 177,066 177,066 31. Billing TN VAT 6/23/2017 7/31/2017 - - 197,000 - 197,000 197,000 9. The DGAP has further stated that para 5 of Schedule-III of the Central Goods and Services Tax Act, 2017, defining activities or transactions which shall be treated neither as a supply of goods nor a supply of services, reads as "Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarging his output VAT liability on deemed 25% value addition to the purchase value of the inputs. Therefore, there was no direct relation between the turnover reported in the VAT returns for the period from April, 2016 to June, 2017 filed by the Respondent and the actual consideration collected from the home buyers. Therefore, the credit of VAT paid on the inputs and the VAT turnover were not considered for computation of the ITC ratio to the turnover for the pre-GST period. Further, post-GST, the Respondent could avail ITC of GST paid on inputs and input services including the sub-contracts. From the information submitted by the Respondent, duly verified from the GSTR-1 and GSTR-3B Returns for the period from July, 2017 to August, 2018, the details of the ITC availed by him and his taxable turnover for the project "AMALFI" during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to August, 2018) periods the ratio of CENVAT/ITC to turnover was furnished by the DGAP as per the Table-C given below:- Table-'C' (Amount in Rs.) S.No. Particulars April, 2016 to March, 2017 April, 2017 to June, 2017 Total Pre-GST July, 2017 to August, 2018 (post-GST) (1) (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng July, 2017 to August, 2018 G=E-F 31,75,25,945 10. GST Collected @ 12% over Basic Price H=G*12% 3,81,03,113 11. Total Demand collected I=H+G 35,56,29,058 12. Recalibrated Basic Price J=G*(1-D) or 89.34% of G 28,36,77,679 13. GST @12% K=J*12% 3,40,41,322 14. Commensurate demand price L=J+K 31,77,19,001 15. Excess Collection of Demand or Profiteering Amount M=I-L 3,79,10,058 13. The DGAP has also observed from Table-'D' that the additional ITC of 10.66% of the turnover should have resulted in commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the Central Goods and Services Tax Act, 2017, the benefit of the additional ITC was required to be passed on to the recipients. 14. On the basis of the aforesaid CENVAT/ITC availability pre and post-GST and the details of the amount collected by the Respondent from the Applicant and other home buyers during the period from 01.07.2017 to 31.08.2018, the amount of benefit of ITC not passed on or in other words, the profiteered amount has been quantified by the DGAP as Rs. 3,79,10,058/- which included GST @ 12% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. 17. The DGAP has also stated that the present investigation has covered the period from 01.07.2017 to 31.08.2018. Profiteering, if any, for the period post August, 2018, has not been examined by him, as the exact quantum of ITC that would be available to the Respondent in future could not be determined at the stage, when the construction of the project was yet to be completed. He has further stated that the provisions of Section 171 (1) of the Central Goods and Services Tax Act, 2017 requiring that "a 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", have been contravened by the Respondent in the present case. 18. The above Report was considered by the Authority in its meeting held on 26.02.2019 and it was decided that the Applicants and the Respondent be asked to appear before the Authority on 13.03.2019. The Respondent was issued notice on 27.02.2019 to explain why the above Report of the DGAP should not be accepted and his liability for violating the provisions of Section 171 of the CGST Act, 2017 should not be fixed along with imposition of penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt - slab wise (ending 55 at slab 35) 55 7 Billing on possession 5 TOTAL 100 The Respondent has also contended that after slab 35 was cast, demand could be raised only on possession, however, credit had been accruing to him for the construction work carried out between slab 35 and possession. He has further contended that the finishing activity had to be carried out before possession demand which could result into accrual of huge credit, thus, the mechanism of comparing the credit during the period with the turnover could not provide the correct picture of profiteering since the billing and credit did not accrue simultaneously. 20. The Respondent has also submitted that the agreement for sale of premises entered into between the buyer and the Respondent specified the milestone for recovery of the amount and the invoice could be raised only on achieving milestones, whereas the credit accrued on incurring of expenditure on construction. Therefore, there was no synchronization between the accrual of credit and the value of taxable service during any period. He has further submitted that due to this reason, the percentage of utilization of credit during the period would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the credit availed figure during the post-GST period amounting to Rs. 3,31,12,094/- must be reduced in Table-C and as per his calculations, the revised Table-C would be as follows:- Particular Pre-GST Post-GST Net Cenvat / ITC (after reducing Rs. 3.31 Crore) (A) 1,67,13,377 1,66,96,462 Total Saleable Area of the project (in sq. ft.) (B) 3,54,025 3,54,025 Total Area Sold Relevant to Taxable Turnover (C) 2,65,540 2,84,335 Relevant Cenvat/ITC (D) = (C*A/B) 1,25,36,036 1,34,09,755 Taxable Turnover (E) 64,71,28,251 31,75,25,945 Ratio (F) = (D/E*100) 1.94% 4.22% 21. The Respondent has also argued that the DGAP had computed the profiteered amount of 3.79 crores which included the base price as well as 12% GST on the same which amounted to 40,61,792/-. It was also submitted that although the Respondent did not accept the calculation, but even if the DGAP's Report was accepted, the excess collection made by the Respondent was only 3.38 crores as the excess GST collected by him had duly been deposited with the Government and the Respondent had not retained the same and hence, the same could not be considered as profiteered amount to be passed on to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had paid the taxes and filed the return, however, there may be a possibility that the suppliers have not paid taxes in respect of the supplies on which credit has been availed by the Respondent and hence the same may get disallowed to the Respondent and therefore, this fact needed to be considered while computing the benefit which has accrued to the Respondent. 26. The Respondent has also submitted the details of total saleable area, area unsold as per invoices and number of flats sold till August 2018 as follows:- Particulars Flats Area No. % with respect to total Sq. mt. % with respect to total Pre-GST- Sold Prior to April 2016 90 51.43 1,86,155 52.58 April 2016 to June 2017 38 21.71 79,385 22.42 Post-GST- Sold July 2017 to November 2017 (prior to last slab milestone) 2 1.14 3,940 1.11 December 2017 to August 2018 9 5.14 18,350 5.18 September 2018 to February 2019 4 2.29 8,235 2.33 Unsold Flats 32 18.29 57,960 16.37 Total Flats 175 100.00 3,54,025 100.00 27. The Respondent has further submitted his pleadings in respect of accounting of 25% VAT and stated that Section 5 of the Tamil Nadu Value Added Tax Act, 2006 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived? (Y/N) N N 30. The Respondent has also submitted the details of the ITC availed after August, 2018 till the date of filing of submissions in respect of Amalfi project, as reflected in the GSTR-3B for the month of September, 2018 to February, 2019 as follows:- Sr. No. Month Amount 1 September 2018 6,04,964 2 October 2018 29,87,735 3 November 2018 34,74,662 4 December 2018 16,00,395 5 January 2019 12,79,374 6 February 2019 7,44,532 31. In his submissions dated 10.05.2019 the Respondent has reiterated the submissions which were made by him on 13.03.2019 and 16.04.2019. Further the Respondent has submitted that he has duly passed on 2.28% benefit to the eligible customers and a total benefit of Rs. 81,08,343 has been passed on. The calculation of the amount is as follows:- Rs. 31,75,25,945 * 2.28% = Rs. 72,39,592 12% GST on above = Rs. 8,68,751 Total = Rs. 81,08,343 32. The Respondent has also contended that the above computation of Rs. 81.08 lakhs included customers who had booked flats after 1st July, 2017 i.e. in the post-GST period. It was further contended that since the flats have been booked after the GST had been implemented the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of his flats by 10.66% due to additional benefit of ITC and by charging GST at the increased rate of 12% on the pre-GST basic price, he has contravened the provisions of Section 171 of the CGST Act, 2017. The DGAP has further submitted that the amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount came to Rs. 3,79,10,058/- which included 12% GST on the basic profiteered amount of Rs. 3,38,48,2661-. The DGAP has also intimated that this amount of profiteering also included the profiteered amount of Rs. 1,69,8781- including 12% GST on the base amount of Rs. 1,51,676/- in respect of the Applicant No. 1. He has also supplied the details of all the buyers who have purchased flats from the Respondent along with their unit numbers and the profiteered amount vide Annexure-22 attached with the Report. 35. The Respondent has claimed that the method of calculation adopted by the DGAP while computing the profiteered amount in Table-D based on the computations made in Table-C was incorrect. Perusal of Table-C shows that the ratios of CENVAT/ITC to turnover for the pre and post-GST periods have been computed on the basis of the Returns filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the above benefit from his own money. The Respondent has sufficient leverage in adjusting the amount of above benefit while passing on the same periodically in case there is more or less passing on of the above benefit. Therefore, the above claim of the Respondent is incorrect. 37. The Respondent has also submitted that as per his computations mentioned in the Table supra the ratio of availment of ITC to the taxable turnover for the period from July, 2017 to March, 2018 was 10.75% and for the period from April, 2018 to August, 2018 was 28.89% whereas the average percentage of availment had been shown in Table-C as 12.60% and hence, there was no synchronization of accrual of credit with raising of demand of recovery amount. The above claim of the Respondent is not correct as the ratio of ITC to turnover computed by the Respondent exactly matches with the ratio of 12.60% computed by the DGAP in Table-C and therefore, the above claim of the Respondent is far-fetched and hence the same cannot be accepted. 38. He has further submitted that the total credit accruing with respect to the possession demand has been taken in the calculation in Table-D, however there was no corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2017. In this regard it would be appropriate to mention that the CC has still not been obtained by the Respondent and hence there is no question of reversal of the ITC at this stage. Moreover, as per the present proceedings no benefit is proposed to be passed on in respect of those flats which have not been sold yet and the ITC in respect of these flats would be available with the Respondent in case it is required to be reversed at the time of issue of CC. Hence, the above argument of the Respondent is untenable. 41. The Respondent has also submitted that GST would be payable at the rate of 5% without benefit of ITC w.e.f. 01.04.2019 and hence the actual benefit of ITC could be computed only after 1st April, 2019. It is apparent from the perusal of Notification No. 03/2019-Central Tax (Rate) dated 29.03.2019 that 5% rate of tax would be applicable only prospectively from 01.04.2019 and all the additional ITC which the Respondent has availed till 31.03.2019 would have to be passed on by him to his customers. The above benefit can also not be delayed till the completion of the project even if the benefit of ITC is allowed by charging full rate of tax as the same is required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1 Total area of the project 3,10,860 4,76,925 2 Area sold prior to GST 2,23,795 61,078 3 Area sold post GST 48,680 78,085 4 Total flats of the project 264 245 5 No. of Flats sold prior to GST 193 28 6 No. of Flats sold post GST 38 40 7 If Yes, date of OC or if No date of completion mentioned in RERA Jun' 2020 Sep' 2023 8 Whether OC received? (Y/N) N N 45. The Respondent has also claimed that he has duly passed on 2.28% benefit to the 137 eligible customers and total benefit of Rs. 81,08,343 has been passed on by him as per the computation made by him in para supra and as per Annexure-1 attached to his submissions dated 10.05.2019. However, the computation of benefit @ 2.28% is not correct as the same has been calculated after deducting an amount of Rs. 3,31,12,094/- of ITC on the ground that no corresponding turnover was realised against the above credit. As has been discussed in para supra the above amount cannot be reduced as it has already been availed by the Respondent and hence the above claim of the Respondent is not tenable. The Respondent has also not supplied any reliable and cogent proof that the above benefit has been received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttached with the Report dated 21.02.2019. 49. In view of the above facts 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 buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above. Since the present investigation is only up to 31.08.2018 any benefit of ITC which accrues subsequently shall also be passed on to the buyers by the Respondent. The concerned Commissioner CGST/SGST shall ensure that the above benefit is passed on to the eligible flat buyers. In case the above benefit is not passed on by the Respondent the Applicant No. 1 or any other buyer shall be at liberty to approach the Tamil Nadu State Screening Committee to initiate fresh proceedings against the Respondent as per the provisions of Section 171 of the CGST Act, 2017. 50. The Respondent vide his submissions dated 16.04.2019 has himself admitted that he has two more projects which were under execution as on 1st July ,2017, details of which have been submitted by him as follows:- Sr. No. Particulars Tiana Anchorage 1 Total area of the project 3,10,860 4,76,925 2 Area sold prior ..... X X X X Extracts X X X X X X X X Extracts X X X X
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