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TMI Blog2020 (1) TMI 1585X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant No. 1, inclusive of GST. The Respondent has also realized an additional amount of Rs. 1,41,75,013/- (inclusive of GST as applicable) from all other home buyers than the Applicant No. 1. The total amount of profiteering on part of the Respondent works out to be Rs. 1,42,45,741/- (Rs. 1,75,013 + Rs. 70,728/-) and the same is tabulated in Annexure- 19 of the Report of the DGAP dated 02.07.2019 - the DGAP is directed to further verify the amount of ITC benefit claimed to have been passed on to his home buyers by the Respondent as per the provisions of Rule 133 (4) of the above Rules and submit his Report clearly mentioning the verified amount of benefit passed on by the Respondent to his home buyers and the balance amount still to be passed on to each of the home buyers. X X X X Extracts X X X X X X X X Extracts X X X X ..... letters/emails dated 31.01.2019, 01.02.2019, 07.02.2019, 20.02.2019, 08.03.2019, 18.03.2019, 15.05.2019, 24.05.2019, 31 .05.2019, 14.06.2019, 21.06.2019 and 28.06.2019. The submissions of the Respondent were summed up by the DGAP as follows: a) The Respondent had stated that after implementation of GST, he had informed the homebuyers regarding the benefits to be passed on, on account of the implementation of the Central Goods and Services Tax Act, 2017. b) The Respondent had stated that the Applicant No. 1 had already approached him and he had redressed the above Applicant's grievance. c) The Respondent had also submitted sample copies of letters (all dated 03.11.2019) issued to the Applicant No. 1 and other home buyers, informing them about the benefit of input tax credit as per his calculation and credited the same to them. 5. 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-I Returns for the period August, 2017 to December, 2018. b) Copies of GSTR-3B Returns for the period August, 2017 to December, 2018. c) Copies of ST-3 and VAT R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut passing on the benefit of input tax credit @ Rs.40/- per sq.ft. However, the correctness of the amount so passed on by the Respondent to the home buyers had to be determined by the DGAP in terms of Rule 129(6) of the Rules. 9. The DGAP has further stated that the para 5 of Schedule-Ill of the Central Goods and Services Tax Act, 2017, defining activities 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 Il, sale of building". Further, Clause (b) of para 5 of Schedule Il of the Central Goods and Services Tax Act, 2017 reads as "(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier". In the light of these provisions, the DGAP has contended that the ITC pertaining to the units which were under construction but not sold was provisional ITC that may be requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to December, 2018) periods was furnished by the DGAP as per given in the Table-'B' below:- 11 . The DGAP has also submitted from the above Table-'B' that the ITC as a percentage of the total turnover that was available to the Respondent during the pre-GST period (April, 2016 to June, 2017) was 2.34% and during the post-GST period (July, 2017 to December, 2018), it was 5.65% which clearly confirmed that, post-GST, the Respondent has been benefited from additional ITC to the tune of 3.31% [5.65% (-) 2.34%] of the turnover. 12. The DGAP has further submitted that the Central Government, on the recommendation of the GST Council, had levied 18% GST (effective rate was 12% in view of 1/3rd abatement for land value) on construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. The effective GST rate on construction service in respect of affordable and low-cost houses up to a carpet area of 60 square metres per house was further reduced from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. In view of the change in the GST rate after 01.07.2017, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Respondent had supplied the construction services in the State of Haryana only. 15. The Respondent had submitted before the DGAP that he had passed on the benefit of Rs. 1,42,56,347/- to the home buyers. A summary of category-wise input tax credit benefit required to be passed on and the benefit claimed to have been passed on by the Respondent, was furnished by the DGAP as is given in Table- 'D' below:- 16. The DGAP has observed from the above Table - 'D' that the benefit claimed to have been passed on by the Respondent was less than what he should have passed on in case of 52 residential flats including that of the Applicant No. 1 (Sr. No. 1 & 2 of table 'D'), by an amount of Rs. 21,33,894/-. The details of these amounts were given in Annexure 20 of the DGAP Report. Further, the benefit claimed to have been passed on by the Respondent appeared to be higher than what he should have passed on, in respect of 716 other home-buyers (Sr. No. 3 of table 'D'), by an amount of Rs. 21,44,500/- details of this excess benefit claimed to have been passed on were given in Annexure-21 of the DGAP Report. However, this excess benefit, claimed to have been pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments provided by the Respondent, giving the names and addresses along with unit no. of the flats allotted to such recipients. Therefore, this additional amount of Rs. 20,83,931/- was required to be returned to such eligible recipients. 19. The DGAP has also stated that the present investigation has covered the period from 01.07.2017 to 31.12.2018. Profiteering, if any, for the period post December, 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. 20. The above Report was considered by the Authority in its meeting held on 09.07.2019 and it was decided that the Applicant No. 1 and the Respondent be asked to appear before the Authority on 02.08.2019. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Report furnished by the DGAP dated 02.07.2019, was acceptable to him. 25. The Respondent vide his submissions dated 05.11.2019 has submitted the list of home buyers along with credit notes and undertakings from the buyers on sample basis showing the amount of ITC benefit which the Respondent has claimed to have passed on. Further, he has also submitted Ledgers in respect of all the home buyers vide his submissions dated 25.11.2019 to prove his claim. 26. We have carefully considered all the submissions filed by the Applicants, the Respondent and the other material placed on record We find that the Applicant No. 1, vide his complaints dated 19.09.2018, had alleged that the Respondent was not passing on the benefit of ITC to him in spite of the fact that he was availing ITC on the purchase of the inputs at the higher rates of GST which had resulted in benefit of ITC to him and that the Respondent was also charging GST from them @12%. This complaint was examined by the Standing Committee in its meetings held on 27.12.2018 and forwarded to the DGAP for investigation. The DGAP, vide his Report dated 02.07.2019 has found that the ITC as a percentage of the total turnover which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent had claimed to have already passed on benefit of Rs. 1,42,56,347/- to his home buyers during the period from 01.07.2017 to 31.08.2019. As evidence, he has submitted list of all his home buyers mentioning the amount of ITC benefit passed on to each of them, Customer-wise ledgers in respect of some of the home buyers which mention entries indicating "being GST input benefit transfer to customer" and has also submitted sample of letters sent to his home buyers in support of his having passed on the benefit of ITC to them in terms of Section 171 of CGST Act. Further, perusal of Table-C D' of the DGAP Report dated 02.07.2019 suggests to us that an amount of Rs. 1,42,56,347/- is claimed to have been passed on by the Respondent to his home buyers on account of ITC benefit. However, it is also clear from Table-'D' of the above DGAP Report that claim of the Respondent of having passed on the benefit of Rs. 1,42,56,347/-, has not been verified at any stage by the DGAP. Accordingly the DGAP is directed to further verify the amount of ITC benefit claimed to have been passed on to his home buyers by the Respondent as per the provisions of Rule 133 (4) of the above Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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