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TMI Blog2022 (10) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... 128 of the Rules, alleging that he purchased an EWS House in the Project at Kamayani Nagar at Rau, Indore from the Respondent in May, 2019 and the Respondent charged GST @ 12% from him instead of 1%. 2. The DGAP in his Report dated 15.12.2021, inter-alia stated that i. The said complaint of the Applicant No. 1 was earlier received by the Authority, which was forwarded by Authority to Commissioner of State Tax, Indore for necessary action with the remarks "Since, the issue doesn't seem to be pertaining to profiteering but might involve wrong charging of GST". However, the Madhya Pradesh State Level Screening Committee examined the said application and observed that since the Applicant's No. 1 house was an EWS House, the applicable GST rate levied on EWS Houses was 8% under affordable Housing Scheme whereas the Respondent had charged 12% GST from the Applicant No. 1 and hence forwarded the matter to the Standing Committee on Anti-profiteering for further investigation. The Standing Committee on Anti-profiteering being satisfied by the State Screening Committee report, decided to forward the said application to the DGAP for further action, in terms of Rule 128 of the Rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt investigation was from 01.07.2017 to 30.11.2020. vii. The Respondent replied vide letter and e-mail dated 08.09.2021 and among other documents, furnished the copy of agreement entered by him with the developer M/s. Shekhar Construction, Flat No. 3, 5 Geeta Bhawan Road, Indore and submitted that in the Project at Kamayani Nagar, the development work of the Project was assigned to M/s. Shekhar Construction. viii. On the basis of the above submission of the Respondent, an addendum to the notice of initiation of investigation was issued on 30.09.2021 for including M/s. Shekhar Construction as a Co- Respondent in the ongoing investigation. ix. In response to the notice dated 22.01.2021 and subsequent reminders/summons/e-mails, the Respondent submitted the following documents/information/reply vide his letters/e-mails dated 08.09.2021 14.10.2021, 30.11.2021 and 03.12.2021. a. Copies of GSTR-1 and GSTR-3B Returns for the period July, 2017 to November, 2020. b. Electronic Credit Ledger for the period July, 2017 to November, 2020. c. ST-3 returns for the period April, 2016 to June, 2017. d. Copies of allotment letters issued to Applicants. e. Details of applicable tax rates, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e GST invoice due to which the Respondent was not able to take credit of the same. g. About availment of GST, in pre-GST regime, the Respondent was having practice of giving tender/contract to the developer on inclusive basis, but under GST regime, he was giving contract on tender value plus GST i.e., the development work was given to the contractor at the rate exclusive of GST and ITC of the GST paid was duly taken by his Head Office and competent authority at the time of determining the value of unit had taken due care of Input Tax Credit. In the previous reply the fact of non-taking of ITC was mentioned, as earlier he was not having practice of paying any tax separately i.e., contract value was inclusive of all taxes. h. Regarding booking of unit on 22.12.2016, the amount which was received by the Respondent was not booking but just amount received by the Respondent along with application for registration for allotment in the project of the Respondent. That of initial amount for registration was not an allotment of unit. That being a Government organisation, the Respondent before launching any new scheme, make survey of respective area to ascertain the actual housing need of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form for seeking allotment of unit in the project, it was clearly mentioned that the allottee was required to make the payment of GST separately and in the present case the GST had been charged accordingly. m. The Respondent was being a Govt. Organisation keeping its record systematically and entire amount of GST collected from the allottee had been properly deposited along with GST Return. n. Determination of price of unit was made in the GST regime and at the time of fixing price of units, the Respondent was considering the effect of input tax available on input services taken for the development of the Project, so there was no issue of anti-profiteering against the Respondent. o. Regarding non-availment of ITC, in the previous letter, older working pattern was mentioned but during GST regime, the Respondent was giving contract on contract price plus GST i.e., he was paying GST separately and taking ITC of GST paid and at the time of determination of prices due impact of ITC was also given. p. During Pre-GST regime all the Returns and other compliances were made in his division only but after post-GST regime all the compliances were made at HO Level, so his previous lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the construction of 02 HIG 'B' Type Duplex, 11 MIG & 17 EWS houses at "Kamayani Nagar". b. Copy of Electronic Credit Ledger for the period July, 2017 to November, 2020. c. Copy of Tran-1. d. Details of applicable tax rates, Pre GST and post GST. e. Copies of GSTR-1 for the period July, 2017 to November, 2020 and GSTR-9 Returns for the period July, 2017 to December, 2019. f. Balance Sheet, P & L with all schedule for FY 2016-17, 2017- 18, 2018-19, 2019-20. g. All Invoice/Bills related to "Kamayani Project" and Completion Certificate. h. Status of Project at "Kamayani Nagar" - project completed and handed over to the Respondent on 26th Feb 2019. i. Copy of Assessment Order for FY 2016-17 and VAT return summary of FY 2017-2018. j. Details of VAT, Service Tax, ITC of VAT, CENVAT credit for the period April, 2016 to June, 2017 and output GST and ITC of GST for the period July, 2017 to November, 2020 for the project at Kamayani Nagar. xii. The Co- Respondent's reply was summed up as follows: a. The Co-Respondent obtained the tenders from the Respondent for construction of residential houses situated at Kamayani Nagar, Rau in the year 2018. b. While fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Project. xvii. The Respondent had contended that during the period from April, 2016 to June, 2017, as Service Tax was applicable, so the Respondent had collected the Service Tax and paid to the Service Tax department. However, on perusal of Service Tax Returns (ST-3) for the period April, 2016 to June, 2017, it was noticed that the Respondent had not shown any taxable turnover therein. However, it was also pertinent to mention here that on perusal of home buyers list provided by the Respondent, it had been observed that the Respondent had raised demands of Rs.6,88,000/- from 4 home buyers during the period April, 2016 to June, 2017. Therefore, the contention of the Respondent was incorrect. xviii. Further, the Respondent had also contended that the Respondent had not taken any CENVAT/Input Tax Credit, so there was no ITC Register maintained and during the period from July 2017 to November 2020, GST was applicable so the Respondent collected the same and paid to the GST department. In this regard, on perusal of GSTR-3B returns for the period July 2017 to November 2020, it was observed that the Respondent had availed ITC of GST to the tune of Rs. 53,74,91,787/-, out of which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued during the pre-GST regime and contract was given inclusive of tax, was incorrect in entirety. xxi. Furthermore, the Respondent had also contended that he was unable to avail the ITC of GST because the Co-Respondent had not issued any separate GST invoice. This contention of the Respondent was also incorrect. In this regard, it was observed that the Co-Respondent had issued GST invoices to the Respondent for the Project work at Kamayani Nagar, Rau, Indore and the copies of which had been submitted by the Co-Respondent and details of which were given below in the Table-A below: Table-'A' (Amount in Rs.) S.No. Invoice No. Invoice date Basic Amount GST rate* GST Amount Grand Total 1 GST/19 06.04.2018 23,83,215 12% 2,85,985.80 26,69,200.80 2 GST/31 25.05.2018 32,13,937 12% 3,85,672.44 35,99,609.44 3 GST/34 27.06.2018 15,92,466 12% 1,91,095.92 17,83,561.92 4 GST/38 06.08.2018 15,18,562 12% 1,82,227.44 17,00,789.44 5 GST/49 05.09.2018 16,23,315 12% 1,94,797.80 18,18,112.80 6 GST/50 01.11.2018 16,74,497 12% 2,00,939.64 18,75,436.64 7 GST/59 04.01.2019 21,55,512 12% 2,58,661.44 24,14,173.44 8 GST/66 19.02.2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible to avail this amount of tax paid i.e., Rs. 23,50,5661- as ITC of GST in his GST Returns and offset his tax liability. The Respondent vide his submission through email dated 30.11.2021, had confirmed that the ITC of GST paid to the sub-contractor was duly taken by his Head Office. Hence, the Respondent had benefited from additional ITC of GST available to him, which he should have passed on to the customers of 17 EWS, 11 MIG Junior and 02 HIG Type B houses, by way of commensurate reduction in basic prices in terms of Section 171 of the CGST Act, 2017. xxvii. As regards the allegation of profiteering, from the documents submitted by the Respondent, it was observed that during the pre-GST era the Respondent was eligible to avail CENVAT credit of Service Tax paid on input services. However, CENVAT credit of Central Excise duty paid on the inputs was not admissible as per the CENVAT Credit Rules, 2004, which was in force at the material time. Further, the Respondent had claimed that the VAT liability was discharged by the sub-contractor and he had neither paid VAT nor filed any VAT Return. Hence, ITC of VAT was also not available to the Respondent in the pre-GST regime. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent on land value), vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. However, the GST rate on construction of "Economically Weaker Section (EWS) Houses" constructed under Affordable Housing, was reduced to 12% (effective rate was 8% in view of 1/3rd abatement on value) from 18% vide Notification No. 1/2018 -Central Tax (Rate) dated 25.01.2018. It was also observed that the Respondent had charged 12% GST from all the home buyers including home buyers of EWS Houses. Accordingly, on the basis of the figures contained in Table-'B' above, the comparative figures of the ratios of ITCs availed/available to the turnovers in the pre-GST and post-GST periods as well as the turnover, the recalibrated base price and the excess realization (profiteering) during the post-GST period considering GST @12%, has been tabulated in Table-'C' below. Table-'C' (Amount in Rs.) S. No. Particulars Post- GST 1 Period A July, 2017 to November, 2020 2 Output tax rate (%) B 12.00% 3 Increase in ITC availed post-GST (%) C 5.92% 4 Net Turnover during July, 2017 to November, 2020 D 3,97,19,111 5 GST @12% E= D*12% 47,66,293 6 Total demand F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the relevant provisions of the CGST Act, 2017 and the Rules, the allegation of the Applicant No. 1 appeared to be partially correct. It was observed that the Respondent had charged GST @12% from the Applicant No. 1 whereas the actual applicable rate of GST was 8% in the cases of all EWS houses as stated in above para. Hence the Respondent had charged GST at the wrong GST rate from the Applicant No. 1 and other home buyers of EWS Houses. Therefore, the issue of charging of GST at wrong rate does not fall under the scope of Section 171 of the CGST Act, 2017. In this situation, the remedial measures as prescribed under the CGST Act, 2017, might be taken recourse to before the appropriate authority so that the Applicant No, 1 might get refund of the extra GST amount paid by him. Hence, the matter was being referred to the jurisdictional GST Authorities for necessary action. xxxi. On the basis of details of outward supply of the construction services submitted by the Respondent, it was observed that the service was supplied in the State of Madhya Pradesh only. 3. Therefore, the DGAP has concluded that, the Respondent had profiteered an amount of Rs. 26,33,536/- (inclusive of GST) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the customers/homebuyers had been properly deposited along with GST Return. iii. At the time of registration, value is not fixed as the development cost is not available so only tentative value is disclosed to the allottee, which include service tax paid at various stages during construction, which included cost and those element of cost, the input credit foregone due to the abetment, etc. the total cost of the project is discounted @60% and only 40% of the estimated cost is eligible for collection of service tax. iv. Work order for Phase Registration No. P IND-18*1569 involving 17 EWS, AA, MIG JUNIOR, 02 HIG Type 13' Houses at Kamayani Nagar at Rau, Indore was issued 01.01.2018. The investigation has concluded that ITC has created surplus due to change in tax policy. However, there has not been any change of rate during the investigation period. Hence, the total investigation based on wrong data as mention in Table- B and C of the Report and facts and substance, which was not legally tenable and forceful in law. It was clear that the work was started in the GST regime and there is no change in law or no rate of reduction in the GST period in the subject matter of repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld had been commensurately reduced by the Respondent in the GST regime and due benefit of ITC must had been passed on to the customers/buyers of the units in terms of Section 171 of the CGST Act, 2017. Hence, it was concluded that in the instant case, during the period of investigation, the Respondent was benefitted with the additional ITC of GST which was required to be passed on to the eligible recipients in terms of Section 171 of the CGST Act, 2017. Therefore, the investigation carried out against the Respondent on the basis of data and information submitted by the Respondent, was well within the confines of law and hence it was incorrect to say that the basic foundation taken to determine profiteering was not based on the periods of business of the Respondent and the investigation was faulty. ii. In the instant case, since the Respondent raised the demands/ received advance from the home buyers in pre-GST period ie, 01.04.2016 to 30.06.2017, therefore, the claim of the Respondent that the Project started very much after implementation of the GST and determination of price of unit was also made in GST regime, was incorrect. Furthermore, the claim of the Respondent that no ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in GST regime, there was no VAT involved in the work order. v. However, the Respondent in his submissions had claimed Rs. 46,209 as ITC of VAT paid on inputs in his hypothetical Table-B prepared by the Respondent which was incorrect. Moreover, the ratio arrived as 7.2% at Sl. No. 9 for pre-GST period in his Table was also incorrect. Hence, it appeared that the Respondent was trying to mislead the ongoing proceedings by putting false and imaginary figures/data which had got nothing to do with the actual and correct figures/data. Therefore, on the basis of above, it was submitted that the assertions made by the Respondent was not tenable and computation of profiteering had been done by the DGAP within the scope of Section 171 and Rules made thereunder and same was correct and entirely based on the data/information furnished by the Respondent. vi. The investigation in the instant case was carried out within the confines of Section 171 of the CGST Act, 2017 and Rules made thereunder. The contention of the Respondent had not been supported by any detailed methodology recommended by the C&AG study report. However, it was pertinent to mention here that "Implementation of Value Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e actual housing requirement and invite pre-launch booking of the proposed scheme. If sufficient number of bookings are received the approval of the competent authorities is taken for launching of the scheme. It is also submitted by the Respondent that the total investigation is based on wrong data as mentioned in Table-B and Table-C of the Report. In this regard the Authority finds that Section 171 (1) of the CGST Act, 2017 which governs the anti-profiteering provisions under GST, reads as "Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices." Therefore, Section 171(1) of the CGST Act, 2017, requires every supplier to pass on the benefit of reduction in rate of tax or the benefit of ITC to his recipients by reducing the price commensurately. The Authority finds that the Respondent has raised demands/received advance from the home buyers in pre-GST period i.e., 01.04.2016 to 30.06.2017. The Authority also taken note of the submissions of the Respondent that tentative value disclosed to the allottee at the time of booking also includes Service Tax to be paid at various st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent has also referred to CAG study report titled as "Implementation of Value Added Tax in India - Lessons for transition to Goods and Services Tax -A Study Report". It is claimed by the Respondent that, in the said CAG report, the suggested measure to get the true and fair value of anti-profiteering has been mentioned. Hence, the DGAP report lacks the mechanism suggested and is based on assumption not enforceable in law and should be dropped. The Respondent has not produced copy of the said CAG study report. The efforts to find out the said study report did not give any result, however, as suggested by the name itself, the topic of the report was implementation of value added tax in India. As such, any such report and its suggestions are suggestive in nature. In the case in hand, the DGAP has worked out the amount profiteered by the Respondent under the methodology adopted in similar cases in respect of other builders engaged in real estate industry. The said methodology captures the ratio of Cenvat or ITC with the turnover of the pre-GST and post-GST period and based on the comparison of the said ratio the profiteered amount is worked out. Therefore, the said report of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nagar at Rau, Indore during the period of investigation i.e. 01.07.2017 to 30.11.2020. The above amount that has been profiteered by the Respondent from his home buyers/customers/recipients in the above said Project shall be refunded/returned/passed on by him, along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment, under the provisions of Rule 133 (3) (b) of the CGST Rules, 2017. 5. The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 26,33,536/- for the Project at Kamayani Nagar, Rau. Indore. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment, as per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017. 16. The complete list of home buyers/customers/recipients has been attached as Annexure - 'A' with this Order, containing the details of the amount of benefit of ITC to be passed on in respect of the Project at Kamayani Nagar at Rau, Indore of the Respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /SGST Commissioner shall also submit a Report regarding the compliance of this Order to this Authority and the DGAP within a period of 4 months from the date of this Order. 21. Further, on perusal of the Report, it is also observed that the Respondent appears to have charged GST at the wrong GST rate from the Applicant No. 1 and other homebuyers of EWS Houses. As the issue of charging of GST at wrong rate does not fall under the scope of Section 171 of the CGST Act, 2017, the concerned jurisdictional CGST/SGST Commissioner may like to take necessary action in this matter, as deemed fit. In this regard, a letter dated 10.05.2022 has already been written to the Commissioner of Commercial Taxes Indore, Madhya Pradesh by the Additional Director General, DGAP, New Delhi. 22. Since the Respondent has profiteered in the instant project, there is every likelihood that he has profiteered in other projects also under the GSTIN-23AAALM0488N1ZS. The Authority has reasons to believe that the Respondent may have resorted to profiteering in the other projects also and hence, it directs the DGAP under Rule 133 (5) to investigate all the other projects of the Respondent under the same GST registr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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