9911796707
TMI Blog2022 (8) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of the CGST Rule, on the following issues:- a. The claim of the Respondent that he has passed on the ITC benefit amounting to Rs. 19,680/- to Applicant No. I and amounting to Rs. 1,54,87,120/- to the 769 other buyers, needs to be verified by obtaining acknowledgements from approximately 10% (78 buyers) of the buyers. b. It is also apparent from the record that the Respondent has claimed to have passed on TTC benefit amounting to Rs. 1,55,06,800/- on amount of profiteering for the period from July 2017 to June 2019, Therefore, he is also liable to pass on interest @18% on the profiteered amount to the flat buyers from the dated from which he has received the additional amount of consideration from them till the passing on of the ITC benefit, as he his used this amount in business as per the provisions of section 171(1) of the CGST Act, 2017 read with rule 133 (b) of the above Rules. The DGAP is directed to investigate, compute and ensure that the applicant interest is also paid to all eligible housebuyers. c. The difference in the turnover of the Respondent for the period from April 2016 to June 2017, adopted in the DGAP Report and the Statutory Ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II. In response to the DGAP letter dated 18-12-2020 and subsequent reminders dated 6-1-2021, 29-1-2021, 25-2-2021, 29-7-2021, 26-8-2021, 14-9-2021, 14-10-2021 and summons dated 9-3-2021, 23-3-2021 and 30-6-2021, the Respondent submitted his reply vide letters/e-mails dated 1-2-2021, 15-3-2021, 26-3-2021, 25-6-2021, 6-7-2021, 18-8-2021, 1-10-2021, 4-10-2021, 11-10-2021, 17-11-2021, 9-12-2021, 11-12-2021 and 13-12-2021. The reply of the Respondent is reproduced below. (a) He was executing multiple projects under the same Service Tax No. /Vat No. and the same GSTIN. The turnover declared is statutory returns includes the turnover of other projects as well, therefore there was a difference in turnover in pre and post-GST (b) He had passed on the credit of the ITC to the buyers in November 2018 and no interest was paid along with it. (c) He had applied for Occupation Certificate with the respective authority. (d) The project "Laxmi Apartments" under investigation is an Affordable Housing project, which was exempt from payment of Tax and the Respondent was not charging any Service Tax on the same Further the Respondent had not claimed any S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable to him. Post-GST the Respondent is collecting the GST (Output Tax) from the Customers and paying the GST (Input Tax) to the Suppliers (who were charging VAT) and GST (Input Tax) to Contractors (who were not charging any GST). Thus, the purposes of comparing the increase in ITC available to the Respondent could be done only with the items on which it was earlier getting ITC or charging tax. The Respondent stated that he would not get any benefit from the Input Tax paid to the Contractor. (ii) The alternate method to calculate the benefit to the Respondent post-GST. Respondent stated that he had passed on a 3% GST benefit to the Customers calculated on the payment due from the Customers after 1-7-2017 amounting to Rs. 1,59,35,584/-. The percentage had been estimated based on the expected benefit, the Respondent would receive on the reduction in the Cost of the Contractors post-GST. An approximate cost of 50% is incurred on the payments to the Contractors. The Respondent had renegotiated a reduction of 7% in the Contactors Bills post-GST. The effective reduction in the Cost to the Respondent was estimated by him as below: Particulars Pre-GST Post-GST Incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the State Governments, which got subsumed in the GST, Out of these taxes, the ITC (ITC) of some taxes was not allowed in the erstwhile tax regime. In the case of constraction service, while the ITC of Service Tax was available. The ITC of Central Excise duty paid on inputs was not available to the service provider. Such input taxes, the credit of which was not allowed in the erstwhile supplied, resulting in increased price. With the introduction of GST w.e.f. 1-7-2017, all these taxes got submitted in the GST and ITC of GST is available in respect of all goods and service unless specifically denied. Broadly, the additional benefit of ITC in the GST regime would be limited to cases input taxes, the credit of which was not allowed in the pre-GST regime but is allowed in the GST regime. This additional benefit of ITC in the GST regime is required to be passed on by the suppliers to the recipients by way of commensurate reduction in price, in terms of section 171 of CGST Act, 2017. In the present case, it is observed that in the pre-GST regime, the Respondent was neither charging Service Tax from the homebuyers nor was paying Service Tax to the subcontractors on the service received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -GST (July 2017 to October 2020) periods was furnished in table-A below. Table-A (Amounts in Rs.) Sl. No. Particulars Total April-16 to June 17 1-7-2017 to 24-l-2018 25-1-2018 to 31-10-2020 Total Post-GST 1 CENVAT credit of Service Tax Paid Input Services (A) - 2 Input Tax Credit of VAT paid on Inputs (B) 1,07,07,174 - 3 Input Tax Credit of GST Availed (C) 1,47,94,711,83 5,66,97,319.21 7,14,92,034,04 4 Total CENVAT Input Tax Credit Available D=(A+B+C) 1,07,07,174 1,47,94,714,83 5,66,97,310,21 7,14,92,03.00 5 Total Turnover as per homebuyers list (E) 50,46,00.900 24.42,31,671 45,62,27,065 70,04,58,736 6 Total Suitable Carpet Area (In. Sq. Ft.) (F) 4,58,024,32 4,58,024,32 7 Saleable Area relevant to turnover (In. Sq. Ft.) (G) 3,46.480.00 4,43,191,10 8 ITC relevant to Sold Area (H) = G/F*D 80,99,617,17 6,91,76,748,53 9 The ratio of ITC to Turnover (I) H/E*100 1.61% 9.88% VIII. In the above table-A, the turnover in respect of cancelled units had been excluded from the total turnover. The Respondent, had also go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over post-GST as per table (%) C 9 88 9 88 9.88 4 An increase in ITC availed post-GST (%) D=9.88% (less) 1.61% 8.27 8.27 8.27 5 Analysis of Increase in input tax credit: 6 Base Price raised from July 2017 to October 2020 (Rs.) E 24,42,31,671 45,61,27,065 70,04,58,736 7 GST raised over Basic Price (Rs.) F=E*B 2,93,07,801 1,64,98,165 6,58,05,966 8 Total Demand raised G=E+F 27,35,39,472 49,27,25,250 76,62,64,702 9 Recalibrated Basic Price H=E*(I=D) or 91.73% of E 22,40,33,712 41,84,97,087 64,25,30,799 10 GST on recalibrated basic price @ 12% or 8% I=H*B 2,68,84,045 3.34,79,767 6,03,63,812 11 Commensurate demand price J=H+I 25,09,19,757 45,19,76,854 70,28,94,611 12 Excess Collection of Demand or Profiteered Amount K=G-J 2,26,21,714 4,07,48,377 6,33,70,091 XI. from table- 'B' above, it observed that the additional ITC of 8.27% of the turnover should have restacked in the commensurate reduction in the base price as well as cum-tax price. Therefore, in terms of Section 171 of the CGST Act, 2017, the benefit of such additional ITC was required to be passed on to the recipients; XII. Having established the fact of profiteerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was computed by DGAP, have no confirmation was required. Furthermore, it is observed that in respect of one homebuyers Sh. Moolchand Bandal, unit No. 905 was braked by him on 15-4-2016 (pre-GST), and later on it was cancelled by him and the same unit was rebooked on 22-2-2020 by Sh. Anand Singh, therefore, no email was sent to the new home buyers. Hence, leaving these 8 (6 repeated homebuyers, one homebuyers in case of whom no profiteering was computed, and one new homebuyers) homebuyers in the said list 78, the actual verification had been done in respect of 70 homebuyers only Except for 4 homebuyers in the said list of 78 homebuyers the Respondent provided email IDs of all the home buyers. However, in respect of the remaining 4 homebuyers, the Respondent provided his address. Therefore, emails were sent to 66 homebuyers, Out of 66 homebuyers replies (emails) from only 18 homebuyers, 6 (including Applicant) had confirmed that the benefit of ITC had been received, and 10 had denied that the benefit of ITC has not been received by him from the Respondent and 2 had neither confirmed nor denied but mentioned some other reply, In respect of the remaining 48 homebuyers to whom letters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 1,55,710 1,20,800 0 1,55,710 Unit No. 903 was ex-booked in Feb 2020 by a new buyers. Hence in the basic buyers 9 Other than Applicant 1 58,391 45,300 0 58,391 No profiteering amount was computed carried. Hence in the was sent to the new basic buyers 10. Other than Applicant 768 5,77,95,014 2,26,58,875 0 5,77,95,014 Mails/letters were sent 20-70 buyers only as identified In the NAA Sub Total V=7+8+9 750 5,80,09,115 2,28,24,975 0 5,80,09,115 All the buyers to within to email/letters were sent, Total VI=IV+V 820 6,33,70,091 2,42,38,751 1,41,636 6,32,28,455 - Unsold unit 17 0 0 0 0 Unsold unit Grand Total VI=IV+V+9 839 6,33,70,091 2,42,38,751 1,41,636 6,32,28,455 Profiteered amount to he passed on. XV. Therefore, as per the directions contained in the aforesaid order of the NAA for the DGAP, necessary verification of the claim of the Respondent was done based on emails/addresses provided. From Table-A above, it was verified that the Respondent had passed on an amount of Rs. 1,14,636/- to 7 homebuyers including an amount of Rs. 19,680/- passed on to the Applicant. However, it was observed that the Respondent is still required to pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act, 2003, it is submitted that the Respondent is eligible to claim the ITC of VAT in the pre-GST regime. XVII. Based on the details of outward supplies of the construction service submitted by the Respondent, it was observed that the service had been supplied in the State of Haryana only. XIX. Basic on aforesaid discussions and finding it is concluded that in the initial investigation Report dated 25-3-2020, the profiteered amount was computed as Rs. 1,39,41,309/- in respect of 770 homebuyers. The Respondent claimed to have already passed on the ITC benefit of Rs. 1,55,06,800/- to all the 770 homebuyers. However, the NAA did not consider the Respondent's claim and vide Interim Order No. 24/2020 dated 19-11-2020, directed the DGAP to verify the Respondent's claim by obtaining acknowledgements from approximately 10% (78 buyers) of the buyers selected randomly from the list of all homehuyers and also directed the DGAP to further investigate the present case up to 31-10-2020 or till the dated of issue of Completion Certificate, whichever is curlier. In this regard it was concluded that the accessary verification of the claim of the Respondent had been done based on email ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to; a. Fixation of Price of the flats; and b. Due date of instalments 1.4 The project Laxmi Apartment is divided into two parts as follows; First Part Tower 1 to 9 Second Part Tower 10 2. Taxability of The project "Laxmi Apartment" 2.1 Pre-GST Taxability 2.2.1 Service Tax In the pre-GST period, the project was exempted from Service Tax in terms of Notification No. 25/2012 dated 20th June 2012. Further, even the sub-contractors providing services to the company were also exempted from payment of Service Tax and therefore there was no service tax cost being absorbed by the company in relation to sub-contractors. 2.2.2 Value Added Tax (VAT) As regards Sales Tax the company was required to discharge VAT in the state of Haryana. The copies of relevant VAT assessment orders were already submitted before the DGAP. 2.2 Post-GST Taxability The project being an affordable housing project was chargeable to GST with an effective GST rate of 8%. Further in GST the subcontractors were also liable to charge GST from the company. The charge of taxes from the company became an additional cost for the company as no such taxes were collected before the impleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... started after July, 2021 and even as on date the second part of the project is not even 50% complete. 3.2.2 The time span of the real estate project therefore, requires due considerations, Further even the value of inward supplies (expenses) was independent of each other and do not have any correlation with each other in any manner whatsoever. 3.2.3 The optimum results of any analysis of real estate project could be arrived only if it is undertaken from the beginning of the project till the completion of the project. However, in the instant case the DGAP had undertaken the analysis by comparing the inward supplies and outward supplies of limited period and further compared the values of pre and post-GST. Since the entire method used by the DGAP is very ffimsy and arbitrary the same is liable to be rejected. 3.3 Use of wrong rate of tax in the calculation of profiteered amount The DGAP in his report had stated that the output rate of tax 15 12% which is wrong is wrong as the actual rate of tax was only 8% This mistake reflects that the DGAP had not considered the facts of the case rather had updated the figures of the company in a pre-drafted excel work-sheet to arrive at so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the considered view of the company the profiteering amount shall be calculated till the date of completions as the company would had final figures and as regards Part-2 of the project (Tower 10) since the constructions had commended after July 2021 the same shall be outside the scope of the notice issued by NAA even if some booking amount was received during the period of review. 3.9 The summarized details of the Part 1 of the project (Towers 1 to 9) was as follows: Sl. No. Particulars Value In Percentage 1 Total No of flats 804 100.00 2 Total No of flats sold till occupation certificate 799 99.38 3 Total No of flats unsold till occupation certificate 5 0.62 4 Total area of the project in Sq. foot 433504 100.00 5 Total area of the project sold till occupation certificate (in Sq. foot) 430822 99.38 6 Total area of the project unsold till occupation certificate 2682 0.62 3.10 The total ITC of the company from 1st July, 2017 to 31st July, 2021 for the first part of the project under various categories is as follows: Sl. No. Category Total ITC Reversal of ITC on account of Unsold flats Effective ITC A B C D=CX 0.62% E=C-D 1 Subcontractor 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. reduction in rate of tax (which is not applicable in the given case) and "benefit of input tax credit". However even if for the sake of therotical discussions it is assumed that reducation in price of inward supplies is part of profiteering even then maximum amount would be as under: Category Effective reduction in price or benefit of ITC Subcontractors Rs. 2,00,33,575/- Cement and Steel Rs. 9,06,898/- Other Services Rs. 37,32,805/- Other Goods Total Rs. 2,46,73,278/- From the above table the maximum benefit that the company could be said to have received is Rs. 2,46,73,278/- however, it is again reiterated that this benefit is not profiteering amount in terms of Sec 171 of the GST Act, Further, the company had already passed on the benefit of Rs. 2,06,88,785/- as reduction in price which is 83.84% of the total benefit and the benefit left with the company is very nominal which is required to up the inflation cost over the five years of the project including contingencies and additional costs arising due to delays of Covid-19 pandemic. 3.15 As regards Part-2 of the Project (Tower-10) it is stated that the: (a) The effecitive GST rate is 8% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had contested that under Real Estate Project, the value of inward supplies (expenses) and the value of outward supplies (receipts) was independent of each other and do not have any correlations with each other in any manner whatsoever. In this regard it is submitted that ITC is available on the inputs goods and services purchased/used in the turnover i.e., the amounts collected from the customers. In Real Estate Sector, if no payments were being received or no amounts were collected from the customers/buyers, the construction or development of the project would of the project would stop in absence of money. If, the payments were received/collected as per the payment plans, the construction or development of the project would continue as per the development plan and accordingly inputs would be used in the construction of the project on which the "Input Tax Credit" would be utilized for payment of GST on the amount/payments collected/received from the customers/buyers. Therefore, it is amply clear that the ITC which is related to inputs and taxable turnover which is related to outputs (payments of GST on amounts collected) was mutually dependent on each other. Hence it is incorrec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y dependent on each other. Thus the ratio of ITC to taxable turnover in pre-GST regime would not change drastically even if the long span of period is considered. Further in respect of pre-GST period i.e. from 1-7-2017 to 31-7-2017 to 31-10-2020, it is submitted that in the instant case, initially the DGAP received reference from the Standing Committee on Anti-Profiteering on 28-6-2019 to investigate the matter, and Notice for initiation of investigation was issued on 9-7-2019. Hence the period from 1-7-2017 (date of implementation of GST law) up to the month of receipt of reference was taken up for investigation (post-GST) i.e., from 1-7-2017 to 30-6-2019. This practice is uniformly adopted by DGAP in respect of all investigations to cover the period of investigation. It is further clarified that the DGAP and the NAA were statutorily required to complete his task within a give time frame.. Therefore, the ITC availed and the consequential profiteering. if any, had to be determined at a given point of time and such determination cannot be deferred till the completion of the project. Hence, the investigation was done up to 30-6-2019 and investigation report was submitted to the NAA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement cost etc. However, he had forgotten to mention the factors which led to decrease in cost of construction as the Respondent had become eligible for credit of GST paid on materials like steel and cement in the post-GST period which was not available to him on the Central Excise Duty. Entry Tax etc. paid on inputs like steel and cement in pre-GST period. Moreover, the increase in subcontractor's cost (due to applicability of GST on subcontractor's service in GST regime) had also increased the availability of ITC which was not available to the Respondent in pre-GST regime. However, in terms of section 171 of the CGST Act, 2017, the benefit of additional ITC is required to be passed on by every supplier of goods/service in the supply chain. Hence, due to availability of additional benefit of ITC to the subcontractor, the subcontractors were also required to pass on the benefit of ITC to the Respondent in terms of section 171 of the CGST Act. 2017. In fact, the subcontractor's cost must have decreased as against the claim of the Respondent of having subcontractor's cost being increased. Further, by paying more taxes on inputs and inputs services, if any, in GST r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m only whereas the benefit of ITC must he passed on to his customers on each and every consideration demanded by the Respondent in terms of section 171 of the CGST Act, 2017. Therefore, the claim of the Respondent is not acceptable. vi. The Respondent had contended that second part of the project i.e., Tower 10, the construction commenced after July. 2021 and just because of booking amounts received, the same could not be made part of issue under consideration. In this regard it is submitted that project was launched in GST regime and the Respondent had obtained single RERA registration for the entire project. Since, for both the parts, there was single RERA registration that was obtained in pre-GST period by the Respondent, the second part cannot be spared from the current investigation on the mere basis that the construction of same was commenced in July. 2021. Accordingly, the DGAP had adopted a uniform practice of limiting the scope of investigation only that project (on the basis of RERA registration) in respect which the anti-profiteering application had been filed and for which the direction to investigate had been given by the Standing Committee. However, the scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold area (after reversal of ITC on account of unsold units) as of Rs. 7,46,25,033.75 It is pertinent to mention here that during the course of further investigation in this case, the Respondent submitted before the DGAP that the entire ITC available before the DGAP that the entire ITC available for the project (including Part 2 i.e. Tower 10) was Rs.7.14,92,034/-only and on the basis of the same the net ITC attributable to the sold area was quantified as. Rs. 6,91,76,749/-. There appears substantial difference in the ITC pertaining to the project and it also appears that the Respondent had suppressed the actual figures before the DGAP during the investigation. ix. With regard to Respondent's averments about Subcontractors it is to submit that that in pre-GST regime, the Respondent and his subcontractors were not liable to pay service tax and hence both were exempted. However, after implementation of GST, both were liable to pay GST. However, as stated above that in case of construction service, while the ITC of Service Tax was. available, the ITC of Central Excise duty paid on inputs was not available to the service provider. Such input taxes the credit of which was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement in the post-GST. Hence, it is abundantly clear that the Respondent had been benefitted with the additional ITC in post-GST period. xi. With regard to Respondent's averments about "Other Goods" it is to submit that as the Respondent had not specified these "Other Goods", the claim of the Respondent is not tenable. However, as stated above, the Respondent would definitely have been benefited with additional ITC is post-GST on these other goods due to the availability of ITC of GST paid on these "Other Goods" as various taxes being levied on these "Other Goods" in the pre-GST regime, out of which the credit of certain taxes was not available to the Respondent and same is now available to him. xii. With regard to Respondent's claim that they have passed on the benefit of Rs. 2,06,88,785/- it is to submit that, the claim of the Respondent of having been passed on the benefit of Rs. 2,06,88,785/- had neither been supported with any documentary evident and nor could be verified by the DGAP, Hence same is not tenable. Further, the profiteered amount of Rs. 37,32,805/- as arrived by the Respondent is only an assumption that had got noting to do with the actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be analyzed separately. In order to substantiate the claim the company submitted the following documents. i. Approval Letter dated 26th March, 2015 The company had initially applied for approval to Towers 1 to 9 and same was approved vide letter dated 26th March, 2015, Tower 10 was to extend at the time of first application including approval. ii. Addition of Tower 10 In May, 2019 the company applied for construction of Tower 10 which was approved on 10th Dec. 2019 iii. Completion/Occupation Certificate The company submitted the completion certificate for Tower 1 to 9 which was obtained on 9th July, 2021. The various date of the projects could be summarized as under: Approval of Towers 1 to 9 26th Mar 2015 Approval of Tower 10 10th Dec. 2019 Acute Disruption in Construction activity due to COVID-19 Pandemic Mar, 20 to July, 20 [First wave] Apr. 21 to June, 21[Second wave] Occupation Certificate of Towers 1 to 9 9th July, 2021 Commencement of construction Tower 10 July 2021 Further since, Tower-10 to did not exist before implementation of GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplies (receipt of money form flat buyers the construction of the project would stop. In this regard, the company, stated that the DGAP had misconception that outward and inward supplies of the real, state projects were directly correlated to each other. The inward and outward supplies of real estate project were not co-related and specially it is and Affordable Housing Project substantiate the claim we wish to state that: a. The company had a total of 804 flat in Towers 1 to 9 of which not all the flats are sold at the very inception of the project, rather ever today (after the occupation certificate had been received) 5 flats was unsold, but those flats had already been constructed i.e. inward supplies had been received but there had been no outward supply. b. The company had already received occupation certificate for the project and therefore there would be no major inward supplies (ITC), however, not all the amount due from the flat buyers is received i.e. going forward there be no inward supply but the company would have outward supply on account of balance instalments. c. When the company stated the project then some flats were booked, however, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AP had used wrong rate of tax the calculation cannot be accepted. Dispute 5: Comparing the incomparable The company submitted that DGAP had not understood the facts of the case, He restated that: a. Sec 171 requires that the company had to pass on the benefit of ITC (and not the entire ITC) to the buyer. b. Sec 171 does not cover reduction in cost of inward supplies and we all understand had this been the intention the lawmakers it could have suitably amended the law but even after several amendments he had retained the words benefit of ITC and nor benefit due to implementation of GST or any other term. The Respondent restated that comparing ITCs of two periods cannot be the manner to identify the benefit of ITC for sec. 171 and just because it is proportionately calculated it would give correct results is unacceptable. ITC is not a benefit to the company because the company had to first pay the tax amount to its suppliers/vendors and thereafter it gets credits so its does not come for free. The benefit is when the company was paying a tax amount which was earlier not creditable, therefore becoming a cost but is eligible post-GST, thereby reducing the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a benefit of ITC as no amount was becoming cost pre-GST which is now available as credit. b. Cement and Steel: Similarly, the company was already getting the benefit of Value Added Tax price to implementation of GST and since the company was purchasing it from traders it never has any amount under the head excise duty. Therefore, there is no new ITC which the company is getting due to the implementation of GST, however. The benefit of reduction in cost had been taken into due consideration in Para 4.9. c. Other goods: The company had already specified in various paragraphs that the total procurements were divided in four major categories. The other goods majorly represent cost of Lifts and some electrical fitting. In other works all the details were part of the company's submission. The company offers similar explanation for other goods as is given for Cement and Steel. Dispute 9: Profiteered amount calculated by the company The company reiterated that the DGAP had not appreciated the issue being discussed in the relevant paragraph. The DGAP had compared the ITC amount and since the figures in two tables were not same, the submission of company is contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 171(1) of the CGST Act, 2017 is very clear which states that any reduction in the rate of tax or the benefit of ITC had to be passed on to the recipient by way of commensurate reduction in price. Therefore, the benefit of ITC is to be passed on to each recipient or to each flat buyers of the project. Therefore, the scope of investigation covers all other recipients in that project, besides the Applicant. Hence, the contention of the Respondent in this regard is not considered and the investigation was carried out for both the parts of the project. Further, the Respondent had contested that since the Tower-10 was launched in post-GST regime, the profiteering provisions did not apply to Tower-10 and in support of the contention, the Respondent had relied upon the Orders passed by the NAA in three cases and had claimed that in these cases, the issue was similar wherein NAA had held same as contested by Respondent here. In this regard, the clarifications on each case were submitted as under: a. Devroop Guha v. Signature Global (India) (P.) Ltd. [2021] 124 taxmann.com 493 (NAA) In this case the project was started in the post-GST regime and therefore, the DGAP submitted Nil repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so it is abundantly clear that since the Phase II of the Project Angan was launched in post-GST regime for which the Respondent obtained separate RERA Registration Certificate in Post-GST regime, the fact and circumstances of Respondent's project was again completely different from this case and hence same is also not applicable in the case of Respondent's project. e. Darshan Joshi v. Lodha Developers Ltd. [2022] 137 taxmann.com 301 (NAA). In this case also, during investigation it was observed that the entire project 'Lodha Primo' was launched in post-GST Regime for which RERA Registration Certificate was also obtained by the Respondent in post-GST regime Accordingly, a Nil Report was submitted by the DGAP against the Respondent which was upheld by the NAA on the grounds mentioned in Para 15 of the aforesaid order and therefore vide Para 17 of the Order the NAA agreed with the findings of the DGAP. Therefore on the basis of above submissions the cases quoted by the Respondent in support of his claim were not applicable in the instant case and hence the hence the claim of the Respondent is not tenable. Moreover, it is pertinent to mention here that Tower-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST regime, since the Respondent is eligible for ITC of GST paid on inputs and input services, same had been considered in the computation of profiteering Further the Respondent tabulated three categories of ITC and offered his remarks against each category. In this regard it is observed that first two categories were correct and same had been considered in the report. However, in respect of third category i.e. "ITC not applicable (no tax was applicable) in Pre-GST period but ITC is available as 'No benefit of ITC, as there was no tax cost before implementation of GST which is now available as ITC Rather company is paying the tax amount and thereafter taking credit." The contention of the Respondent is incorrect. In this regard it is submitted that since the Respondent's project "Laxmi Apartment" is under affordable housing scheme of Haryana, in pre-GST regime, the Respondent and his subcontractors were not liable to pay service tax and hence both were exempted. However, after implementation of GST, both were liable to pay GST. Now if the contention of the Respondent is correct, then same is applicable in case of his subcontractor also. However, it is a matter of fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire project of the Noticee. The ratio of the ITC to the taxable turnover is computed to bring in picture the buyers from whom demands were arised or advanced were received by the Respondent so that the additional benefit of ITC attributed to buyers could be commensurately passed on to such eligible buyers. Therefore, to determine the actual ITC attributable to the sold units, the basis of ratio of ITC to the turnover is considered. Hence, the methodology on the basis of ratio of ITC to the turnover of pre-GST regime with post-GST, adopted by the DGAP is corrected and Justifiable under the above provisions of section 171 of the CGST Act, 2017. Furthermore, the methodology adopted by DGAP in its Report is in line with the legal principles and this methodology of DGAP had been consistent throughout in all its reports. The same had been upheld by the NAA in the similarly placed cases. Dispute 4: Rate of Output Tax The averment made by the Respondent is incorrect in its entirety. In the regard it is submitted that primarily, Sl. No. 3(v)(d) of the said Notification No. 20/2017, dated 22-8-2017 is not at all applicable to the Noticee. The said Sl. No. 3(v)(d) is applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ms. Shruti Garg v. Signature Builders (P.) Ltd. [2019] 112 taxmann.com 246 (NAA) wherein the Respondent i.e., Signature Builders Pvt. Ltd. Gurugram claimed the benefit of ITC passed on by submitting copies of credit notes and account ledgers of the homebuyers. However, in the said case, this Authority vide Para 41 of the Order No. 73/2019 dated 13-12-2019, inter alia held that "By no stretch of the imagination this entry could be construed to had been made on account of passing on the benefit of ITC, therefore the above cannot be taken to had been passed on the benefit. Therefore, on the basis of the above submissions, the benefit passed on by the Notices by mentioning the same as "Discount" cannot be treated as benefit of ITC passed on in teams of section 171 of the CGST Act, 2017 and hence the contention of the Respondent is not tenable. Dispute 7: Amount of ITC Respondent in his submission had tabulated the ITC available to him in respect of Part of the project i.e., Tower 9, which pertains to the period from 1-7-2017 to 31-7-2021 whereas the DGAP had considered the period from 1-7-2017 to 31-10-2020 and therefore the amount of ITC in DGAP's report is less than the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t claim the benefit of ITC received by him from his subcontractors as outside the ambit of benefit of ITC required to be passed on by him to his customers, under the provisions of section 171 of the CGST Act, 2017. In view of all of the above clarification the DGAP has started that the Respondent is not entitled to the relief he had claimed vide his all submission. 8. The proceedings in the matter could not be completed by Authority within prescribed time limit due to lack of required quorum of Members in the Authority during the period from 29-4-2021 to 23-2-2022 and minimum quorum was restored only w.e.f. 23-2-2022 in the present case both the Respondent and Applicant No. 1 were given opportunity on 25-7-2022 for personal hearing. The Respondent has requested that his earlier given written submission in the matter may be considered. 9. The Authority after careful consideration of the all DGAP Reports and all of the Respondent's submissions finds as under :- I The Respondent has claimed that project Laxmi Apartments had two separate parts i.e. Tower 1 to 9 being the First Part and Tower 10 being the Second Part. The Authority finds that the project was launched in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Phase III of the project till the date of submissions of the investigation report by the DGAP, Accordingly, a Nil Profiteering Report was submitted by the DGAP in respect of Phase II of the project 'Aagan' which was upheld by the NAA on the grounds mentioned in Para 14 of the Order No. 01/2022, dated 5-4-2022 wherein the NAA inter alia observed that the RERA Registration for the Phase II was done on 22-12-2017 and Phase II was advertised in newspapers on 18-1-2018 and 25-1-2018 and finally the draw of lots for allotment of flats was done on 12-6-2018 and vide Para 17 of the Order No. 01/2022 dated 5-4-2022, the NAA ordered that based on above facts it is established that the Respondent had not contravened the provisions of section 171(1) of the CGST Act, 2017. Therefore, in this case also it is clear that since the Phase II of the Project Angan was launched in post-GST regime for which the Respondent obtained separate RERA Registration Certificate in post-GST regime, the fact and circumstances of the Respondent's project was completely different from this case and hence the same is also not applicable in the case of Respondent's project. e. Darshan Joshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the Respondent in post-GST period Therefore, it is incorrect to say that DGAP has failed to distinguish between the two terms 'ITC' and 'benefit of ITC'. III. The Respondent has contended that the Methodology adopted by DGAP of comparing ITC to Total Turnover is incorrect. The Authority finds that, "Input Tax Credit" available on the inputs is utilized for payment of GST on the amount received from the customers. Therefore, it is clear that the ITC which is related to inputs and taxable turnover which is related to output are mutually dependent each other. Accordingly, comparison of ratios of ITC to turnover in pre-GST periods has been done. Further, the turnover considered for the computation of the profiteering pertains to the sold units only in the project whereas the total ITC availed pertains to the entire project to the entire project. The ratio of the ITC to the taxable turnover is computed to bring in picture the buyers from whom demands were raised or advance were received by the Respondent so that the additional benefit of ITC attributed to buyers could be commensurately passed on to such eligible buyers. Therefore, to determine t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement for land value) on construction service vide Notification No. 11/2017 Central Tax (Rate) dated 28-6-2017. The effective GST rate on construction service in respect of affordable and low-cost houses up to a carpet area of 60 square meters per house was further reduced from 12% to 8%, vide Notification No. 1/2018 Central Tax (Rate), dated 25-1 2018. Therefore, since the Respondent's impugned protect is covered under affordable housing scheme, the rate of GST had been considered as 12% and 8% for the periods from 1-7-2017 to 24-1-2018 and from 25-1-2018 to 31-10-2020 respectively. 10. It is clear from a plain reading of section 171(1) that it deals with two situations. One relating to the passing on the benefit of reduction in the rule of tax and the second pertaining to the passing on the benefit of ITC On the issue of reduction 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 the ITC as a percentage of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CGST Act, 2017. We hold that the Respondent has committed an offence by violating the provisions of section 171(1) during the period from 1-7-2017 to 31-10-2020 and therefore, he is liable for imposition of penalty under the provisions of section 171(3A) of the above Act. However, perusal of the provisions of the said section 171(3A) shows that It has been inserted in the CGST Act., 2017 w.e.f 1-1-2020 vide section 112 of the Finance Act. 2019 and hence accordingly he is liable to penalty only for the amount profiteered after 1-1-202. Hence, the Authority directs that notice he issued for this purpose to the Respondent. 15. The conceded jurisdictional CGST/SGST Commissioner is also directed to ensure compliance of this Order. It may be ensured that the benefit of ITC as determined by the Authority as per the Annexure A of this Order be passed on along with interest @18% to cach homebuyer/recipient/customer, if not already passed on. In this regard an advertisement may also be published in a minimum of two local Newspaper/vernacular press in Hindi/English/local language with the details i.e. Name of the builder (Respondent) M/s Parcena Infrastructure Pvt. Ltd., Project "Laxmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Rules, 2017 as is clear from the said Order which states as follows :- "A period of limitation in all such proceedings, irrespective of the imitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March, 2020 till further order's to be passed by this Court in present proceedings". Further the Hon'ble Supreme Court vide its subsequent Order dated 10-1-2022, has extended the period(s) of limitation 28-2-2022 and the relevant portion of the said Order is as follows: "The Order dated 23-3-2020 is restored and in continuation of the subsequent Order dated 8-3-2021 and 23-9-2021, it is directed that the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any general of special laws in respect of all judicial or quasi-judicial proceedings." Accordingly this Order having been passed today fails within the limitation prescribed under rule 133(1) of the CGST Rules, 2017. 20. A copy of this Order be supplied to the Applicants the Respondent. Commissioner CGST/SGST Haryana the Principal Secretary (Town and Country Planning). Government of Haryana as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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