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TMI Blog2020 (3) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent's project "Mayur Residency Extension". He had also alleged that the Respondent had charged GST @ 18% on the construction service/ works contract service and had not passed on the benefit of input Tax Credit (ITC) to him by way of commensurate reduction in the price of the house after implementation of the GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017. The said application was examined by the Standing Committee on Anti-profiteering in its meeting held on 11.03.2019 and upon being prima facie satisfied that the Respondent had contravened the provision of Section 171 (1) of the CGST Act, 2017, it had forwarded the same with its recommendation to the DGAP for a detailed investigation. The aforesaid recommendation was received by the DGAP on 27.03.2019 (Annexure-2). 2. The DGAP in his Report dated 30.08.2019 has stated that the Applicant No. 1 had submitted copies of the written communication held by him with the Respondent and copies of the demand letters alongwith his application. 3. Thereafter, the DGAP on receipt of the reference from the Standing Committee on Anti Profiteering, had issued a notice to the Respondent on 09.04.2019 (Annexure-3) under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal impact of proportionate ITC. 6. The DGAP in his Report has further stated that vide the aforesaid letters/e-mails, the Respondent had submitted the following documents/information:- a. Copies of GSTR-1 and GSTR-3B Returns for the period from July, 2017 to March, 2019. b. Service Tax and VAT Returns for the period from April, 2016 to June, 2017. c. Copies of TRAN-1 Returns for the transitional credit availed by the Respondent. d. Copies of VAT & ST-3 Returns for the period from April, 2016 to June, 2017. e. Electronic Credit Ledger for the period from July, 2017 to March, 2019. f. Tax rates, pre-GST and post-GST. g. Copies of Balance Sheets for the FY 2016-17 & 2017-18. h. Payment plan of the Applicant No. 1 alongwith agreement and demand letters. i. Details of turnover and ITC in respect of the project "Mayur Residency Extension". j. List of home buyers in the project "Mayur Residency Extension". 7. The DGAP has further stated that the Respondent had requested to treat all the data submitted by him as confidential, in terms of Rule 130 of the CGST Rules, 2017. 8. The DGAP in his Report has further stated that the application, various replies of the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a of Flats in the project (in Sq.mt.) (F) 6077.50 6077.50 7. Area Sold relevant to Turnover as per Home buyers list (G) 2673.7 6077.50 8. Relevant CENVAT/Input Tax Credit (H)=[(C) or D*(G)/(F)] - 30,49,658 9. Ratio of CENVAT/ Input Tax Credit to Turnover [(I)=(H)/(E)]*100 0.00% 11.97% 12. The DGAP has also claimed that as per Table-A, the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was Nil and during the post-GST period (July, 2017 to March, 2019), it was 11.97%. Therefore, he has submitted that it was clear that post-GST, the Respondent had apparently benefited from additional ITC to the tune of 11.97% of his turnover. Accordingly, the DGAP has computed the profiteered amount by comparing the ratio of ITC available to the turnover during the pre-GST period from April, 2016 to June, 2017 with that of the post-GST period from July, 2017 to March, 2019, when the effective GST rate on construction service was 18% imposed vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (Annexure-11). On the basis of the figures mentioned in Table-A above, the comparative figures of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availability pre-GST and post-GST and the details of the amount collected from the home buyers during the period from 01.07.2017 to 31.03.2019, the amount of benefit of ITC not passed on to the recipients or in other words, the profiteered amount came to Rs. 35,98,596/- which included 18% GST on the base profiteered amount of Rs. 30,49,658/-. The home buyer and unit no. wise break-up of this amount has been given in Annexure-12 by the DGAP in his Report. The DGAP has also stated that as per S. No. 12 of Annexure-12, the benefit to be passed on to the Applicant No. 1 worked out to be Rs. 19,953/- which included both the profiteered amount @11.97% of the basic price and 18% GST on the said profiteered amount. The DGAP has further reported that the Respondent has also claimed that he has passed on 4% benefit to the home buyers by way of reduction in the contract agreement value in the post-GST period. However, the DGAP has contended that the Respondent has failed to provide any evidence to show that the reduction in the contract value was on account of the ITC benefit. He has also submitted that on the basis of the details of the outward supplies submitted by the Respondent, it appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edger for the period from 01.04.2016 to 31.12.2018. e. Details of the total number of apartments/flats/commercial units/residential units in the project with total area of each flat. f. TRAN-1 & TRAN-2 Returns. g. Details of CENVAT/ITC Reversal, if any. h. Details of purchase of land alongwith agreements with Group Companies/partners of the subject projects. i. Copy of RERA Registration. 18. The Respondent vide his submissions dated 09.10.2019 has stated:- a. That he has not contravened any Rules or Section of the CGST Act and has reduced his rates in the post-GST regime. On completion of the project, he was transferring the final benefit of ITC to the customers in the form of refund of money. He has also enclosed copies of the receipt of ITC/calculation sheet. b. That he did not agree with the profiteered amount calculated by the DGAP vide Table-B of his Report. He has passed on the maximum benefit to the customers. He has been regularly increasing his basic rate of construction till financial year 2016 as was evident from the copies of the agreements of contract attached by him. The increase in the base rate was furnished by the Respondent as is given below:- Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediately reduced to pass on 4% ITC benefit to the customers and the rest approximately 4% was paid at the time of completion of the project. f. That he was attaching calculation sheet duly acknowledged by the customers as evidence in support of reduction in the price/consideration from Rs. 17,521/- to Rs. 16,8201- and final payment of amount of the ITC benefit. The details of the calculations furnished by him are as per the Table-D below:- Table - D (Amount in Rs.) S.No. Particulars Pre-GST Post- GST Period A April, 2016 to June, 2017 July, 2017 to March, 2019 1 Tax Rate B 6% 18% 2 Ratio of CENVAT credit/ Input Tax Credit to Turnover C 0.00% 11.97% 3 Increase in input tax credit availed post-GST (%) D=11.97% less 0.00% 11.97% Analysis of Increase in input tax credit: 4 Basic Price/consideration collected during July, 2017 to March, 2019 E 2,54,69,428.00 5 GST @18% on Basic price/consideration F=E*18% 45,84,497.04 6 Total Demand collected/raised G=E+F 3,00,53,925.04 7 Recalibrated Basic Price/consideration 88.03% of @17521/sq.mt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars Reference row Amount (in Rs.) By way of reduction in price/consideration. Already passed on :1=a 1 1061475.23 By way of refund. To be refunded :2=b 2 1018773.94 Total input GST credit passed on: 3=(a+b)=(1+2) 3 2080249.17 Our cost before GST: 4 (refer a) 4 26530823.83 GST due before any input benefit:5= (4*18%) 5 4584482.75 Amount passed on by way of input:6=(a+b)=(1+2) 6 2080249.17 Final net GST burden:7=(5-6) 7 2504233.57 % of final input GST burden:8=(7/4)*100 8 9.83 % of final input GST benefit passed on:9=(7/4)*100 8 7.84 h. That as per his calculation Rs. 4,14,587/- was the profiteered amount which was to be passed on to the customers. i. That as per his calculation the amount to be passed on to the Applicant No. 1 was Rs. 11,532.04/- instead of Rs. 19,953/- as was mentioned in the DGAP's Report. The calculation of the profiteered amount due to the Applicant No. furnished by the Respondent as below:- Before GST rates 17521.00 Post GST rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also submitted the following details:- i. GST reconciliation statement for the period from 01.07.2017 to 31.03.2019. ii. GSTR-9 & GSTR-9C Returns for the financial year 2017-18. iii. VAT and Service Tax Returns for the period from 2016-17 and 2017-18. iv. Nil CENVAT folder for the period from 2016-17 and 2017-18. v. Service Tax Record folder for the period of 2016-17 and 2017-18. vi. Service Tax Audit Reports till June-2017. vii. Project wise list of payments received and ITC passed on. viii. Balance Sheets for the Financial Years 2016-17, 2017-18 and 2018-19. ix. Project wise ledger for the period from 01.04.2016 to 31.12.2018. x. Details of total number of apartments and area. xi. TRAN-1 and TRAN-2 Returns-NA (Not Claimed). xii. Details of CENVAT/ITC Reversal-NA (Not Claimed). xiii. Details of Purchase of Land. xiv. Copy of RERA Registration: The Respondent has stated that his projects were not registered with the UP RERA because he was facing technical problem in registration of the projects. He has submitted copies of his communication with the UP RERA. 19. Supplementary Report was also sought from the DGAP on the above submissions of the Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 16820 1541216.6 Rajesh K. Singh 12 Mayur Residency 162 15.07.2017 95.29 16820 1602777.8 Shyam 14 Mayur Residency 161 15.07.2017 95.29 16820 1602777.8 Shalini Sharma 16 Mayur Residency 155 14.11.2017 129.07 16820 2170957.4 Priyanka Srivastava 18 Mayur Residency 117 14.11.2017 129.07 16820 2170957.4 Guru Dutt 22 Mayur Residency 155 11.01.2019 113.53 16820 1909574.6 b) He has passed on the ITC benefit by way of refund vide account payee cheques to his customers as per the annexed Table-1. ii. That he has submitted copies of the agreements (Annexure-A) in support of his claim that he has reduced the price of construction from Rs. 17,521/- per sq. mt. to Rs. 16,820/- per sq. mt. after the introduction of GST. iii. That he has also submitted acknowledgements from the customers (Annexure-B) of their having received the ITC benefit as supplementary evidence. iv. That the documents produced by him were bilateral as the sheets were counter signed and duly acknowledged by the respective customers. These documents were legal evidence of acceptance by the customers that they had accepted the benefit passed on to them by way of reduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5648.64 Total input GST credit passed on: 3=(A+B)=(1+2) 3 11534.04 Our cost before GST: 4 (refer A) 4 147101.40 GST Due Before Any Input Benefit: 5= (4*18%) 5 25418.88 Amount passed on by way of input:6=(A+B)=(1+2) 6 11534.04 Final net GST burden:7=(5-6) 7 13884.84 % of final input GST burden:8=(7/4)*100 8 9.83 % of final input GST benefit passed on:9=(7/4)*100 8 7.84 vi. That the construction of Applicant No. 1's flat had been VSIL completed and as per his own calculations the total refund due to the Applicant No. 1 was Rs. 1,25,821/-, out of which an amount of Rs. 64,233/- had been adjusted as reduction in price and balance amount of Rs. 61,649/- was paid through banking channels. He has also claimed that as per Annexure-B (Page No. 9), the Applicant No. 1 has himself acknowledged that the rate had been reduced by the Respondent. vii. The Respondent has further requested to recalculate his liability with recalibrated price of Rs. 17,521/- per sq. mt. and has furnished his calculations as has been mentioned in the Table-G below:- Table-G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page No. Point No. 1. Shweta Singh 28/03/2017 109 112.84 17521 1977069.6 1 04 & 05 2. Geeta Gupta 15/05/2017 113 108.67 17521 1904007.1 3 04 & 06 3 Ram Harsh 18/06/2017 118 91.74 17521 1607376.5 5 04 & 06 4 Kiran Tripathi 20/06/2017 115 92.04 17521 1612632.8 7 04 & 06 b. The Respondent has stated that the rate of construction mentioned in the contracts was uniform irrespective of the area. He has also submitted the details of the rates prevalent during the particular period (Annexure-1A) as below:- Category Start date End date Rate Units sold Residential 01/09/2014 01/01/2016 15530/sq mt 8 01/02/2016 30/06/2017 17521/sq/mt 16 01/07/2017 Till date 16820/sq/mt 8 Commercial -------------------- -------------------- -------------------- 2 Total 34 c. The Respondent has also annexed Bank Account Statement (Annexure-2) and has stated that 4 customers had not collected the cheques and 3 cheques had been issued but not presented by the customers. d. The Respondent has further annexed the list of recipients (Annexure-3) to whom benefit of ITC/ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commensurate Demand 27479026 Excess Realization or Profiteering Amount 2574898 Less Already Passed on By Way Of Reduction 11 867541 Less Already Passed On By Way Of Repayment 12 1072292 Net Amount Payable 635065 24. This Authority has carefully examined the DGAP's Reports, the written submissions of the Respondent and the other material placed on record. The issues to be decided by this Authority in the present case are as under:- 1) Whether the Respondent has availed benefit of additional ITC which he was liable to pass on to his buyers? 2) Whether any violation of the provisions of Section 171 of the CGST Act, 2017 has been committed by the Respondent? 3) If yes then what was the quantum of profiteering? 25. Perusal of Section 171 (1) of the CGST Act shows that it provides as under:- "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." 26. It is clear from the plain reading of Section 171 (1) mentioned above that it pertains to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the reduction in the rate of construction was due to the benefit of ITC and has claimed that the reduction could be due to any reason like reduction in the cost of construction and the marketing conditions etc. Therefore, the above contention of the Respondent cannot be relied upon in the absence of reliable and cogent evidence. 28. The Respondent has also claimed that he had proposed to increase the rate of construction to Rs. 19,623/- per sq. mt. during the year 2017 however, he had reduced it to Rs. 16,8201- per sq. mt. which was 14.29% less and in case the profiteering was computed @ Rs. 19,623/- per sq. mt. the excess realisation or the profiteered amount would be Rs. (-) 8,11,433/- as per Table-C furnished by him. However, the above contention of the Respondent is untenable as the benefit of ITC cannot be calculated on the basis of the rate of cost of construction. Further, this rate was neither charged by the Respondent nor was required to be taken in to account while computing the profiteered amount as the same is to be calculated on the basis of the additional benefit of ITC which has accrued to the Respondent in the post GST period which is further required to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions dated 25.10.2019 has further contended that he had reduced his rates of construction in the post GST regime to pass on the benefit of ITC. He has also submitted copies of the allotment letters/agreements as per Annexure-A to prove that before coming in to force of the GST w.e.f. 01.07.2017 he was charging Rs. 17,521/- per sq. mt. as cost of construction and post GST implementation he had reduced the cost to Rs. 16,820/- and hence he had passed on the benefit of ITC by reducing the cost by Rs. 701/- per sq. mt. or by 4%. However, perusal of the allotment letters/agreements issued to SISh. Prashant Gupta, Rajesh Kumar Singh, Shrishyam, Mrs. Shalini Mishra, Mrs. Priyanka Srivastava and Sh. Gurudutt (Annexure-A of Table-1) shows that no mention has been made in them to the effect that the rate of construction was being reduced to Rs. 16,820/- per sq. mt. due to passing on the benefit of ITC. Therefore, the claim made by the Respondent in this regard is not tenable and hence the same cannot be accepted. 32. The Respondent has also stated that he has passed on the ITC benefit of Rs. 8,47,441/- by way of reduction in the rate of construction and Rs. 8,10,884/- by way of refun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipients out of which benefit of Rs. 10,00,329/- was passed on by way of reduction in the basic rate and Rs. 12,20,865/- was given by way of refund. Further, vide his submissions filed through e-mail dated 19.11.2019, the Respondent as per his own calculation, has computed the profiteered amount as Rs. 25,74,898/-, out of which an amount of Rs. 8,67,541/- has been claimed to have been passed on by him to the recipients by way of reduction in the rate of construction and Rs. 10,72,292/- by way of repayment/refund and therefore, profiteered amount of Rs. 6,35,065/- was still payable by him to the recipients. It is apparent from the above submissions of the Respondent that as per his own calculations, he has computed different amounts of the benefit of ITC or the profiteered amount which he is required to pass on to his recipients. The Respondent has not followed a uniform mathematical methodology to calculate the benefit of ITC. Therefore, the calculations and the methodology adopted by the Respondent cannot be accepted as reliable, accurate and correct. Accordingly, the claims of the Respondent that he has passed on benefit of ITC by way of reduction in prices and by way of refund, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich shall accrue subsequently shall also be passed on to the recipients/buyers by the Respondent. In case this additional benefit is not passed on to the Applicant No. 1 and the other recipients/buyers, they shall be at liberty to approach the State Screening Committee Uttar Pradesh for initiating fresh proceedings under Section 171 of the above Act against the Respondent. The concerned CGST or SGST Commissioner shall take necessary action to ensure that the benefit of additional ITC is passed on to the eligible recipients/buyers in future. The profiteered amount along with applicable interest shall be paid by the Respondent within a period of 3 months from the date of this order, failing which the same shall be recovered by the concerned Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017, under the supervision of the DGAP. 37. This Authority as per Rule 136 of the CGST Rules 2017 directs the jurisdictional Commissioner of CGST/SGST Uttar Pradesh to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by this Authority is passed on to all the eligible customers/buyers. A report in compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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