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TMI Blog2022 (8) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... g the post-GST period (July-2017 to October-2020), it was 9.88% for the project Laxmi Apartment s . This confirm that, post-GST the Respondent has been benefited from additional ITC to the tune of 8.27% [9.88% (-) 1.61%] of his turnover for the said project and the same was required to be passed on to the customer/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to the customers/flat buyers/recipients as Rs. 6,33,70,091/- (which includes an amount of Rs. 57,557/- in relation to Applicant No 1) for the project Laxmi Apartment . The Authority finds no reason to differ from the above detailed computation of profiteered amount by the DGAP or the methodology adopted by it. The Authority finds that the Respondent has profiteered an amount of Rs. 6,33,70,091/- (Rupees Six Crore Thirty Three Lacs Seventy Thousand Ninety One only) during the period under present investigation. This includes an amount of Rs. 57,577/- in relation to Applicant No 1. Therefore given the above facts, the Authority under Rule 133(3)(a) of the CGST Rules orders that the Respondent shall reduce the price to be realized from the customers/flat buyers/recipients commensurate w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount 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 Returns filed by him during the above needs to be reconciled and explained with proper supporting documents. d. Similarly, the difference in the turnover of the Respondent for the period from July 2017 to June 2019, adopted in the DGAP's Report and Statutory Returns filed by him during the above period needs to be reconciled and explained with proper supporting documents. e. Further, the claim of the Respondent that he has availed VAT credit on Rs. 1,07,07,174/- during the perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecuting 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 Service Tax Input Credit on any Service. (e) Since the project was excerpt from payment of "Service Tax" a similar exemption was available to the 'Contractors" and he too was not liable to payment of Service Tax. (f) He was liable to pay VAT and there was an option available with the Respondent to pay VAI under the Compounding Scheme @ 1% for the Builders effective form April 2014 or the VAT based on the Calculation of the cost of Material Transferred in the execution of the Works Contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Increase in Profit Post-GST Revenue from Project 100 100 Project Cost Land Cost 25 25 Steel & Cement 20 20 Contract Payment (reduction of 7% after GST) 25 23.25 Other Costs 15 15 Net Profit 15 16.75 Total 100 100 The benefit of ITC due to VAT @1 absorbed by the Respondent in the pre-GST era 1.00% The total benefit derived by the Noticee 2.75% Benefit passed on to the customers 3.00% Thus, the Respondent had submitted that he had gained by 2.75% based on calculators ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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 by the Respondent from the subcontractors. However, it is pertinent to mention here that even if the Respondent had entrusted the work to the subcontractors. in that case, based on the above explanation, the subcontractors had benefitted with the additional ITC of GST in the post-GST period which he was required to pass on to the Respondent and similarly in the supply chain of the construction service, the Respondent is also required to pass on the additional benefit of ITC of GST to the homebuyers. It could further be corroborated with the fact that the Respondent had had himself asserted that he had received a 7% benefit from the subcontractors. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 got approval for one more Tower (Tower-10) in the post-GST period Hence, the total saleable area had increased. Further, in the carlier report dated 23-3-2020, the ITC in the post-GST period was taken after excluding the ITC available on account of GST paid to the sub-contractors. However, the same had been considered now based on the explanation in Para 14 above. Therefore, due to the above factors and also extension in the period of investigation, the ITC had also increased substantially in the post-GST period. IX From the above table-'A', it is clear that 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 1.61% and during the post-GST period (July 2017 to 31-10-2020), it was 9.88% fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 profiteering, the next step is to quantify the same, Based on the aforesaid CENVAT/input tax credit availability in pre and post-GST periods and the details of the amount collected by the Respondent, from the Applicant and other homebuyers during the period 1-7-2017 in 24-1-2018. the amount of benefit of ITC that needed to be passed on by the Respondent to the homebuyers comes to Rs. 2,26,21,714/- which included 12% GST on the basic amount of Rs. 2,01,97,959/-. Further, the amount of benefit of ITC that needed to be passed on by the Respondent to the homebuyers during the period 25-1-2018 to 31-10-2020, come to Rs. 4,07,48,377/- which included 8% GST on the base amount of Rs. 3,77,29,979/-. Therefore, the total benefit of ITC that the Respondent needed to be passed on to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 were sent by DGAP a reply from only one homebuyers was received and she had confirmed the receipt of the benefit of Rs. 20,972/- as a discount from the Noticee. A summary of the benefit of ITC claimed to have been passed on to the Applicant and other home buyers and the benefit of ITC passed on and duly verified by the DGAP based on confirmation emails/letters, is tabulated in Table-'C' below: Table-C (Amount in Rs.) Sr. No. Category of Customer No. of Units Profiteered Amount (as per new computation) Benefit claimed to have been passed on by the noticee Benefit passed on and duly verified Difference (Profiteered and duly verified) Remarks A B C D E F G D-F H 1 Applicant 1 57,557 19,680 19,680 37,872 Receipt confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, 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 on the benefit of ITC of GST of Rs. 6,32,28,455/- to 820 homebuyers including an amount of Rs. 37,877/- in the Applicant. XVI. As regards to the compliance with the issue/points raised by the NAA in the aforesaid Interim Order No. 24/2020 dated 19-11-2020, based on the above investigation and findings, it was submitted that- (a) Since the Respondent had submitted that he had applied for an occupancy certificate but late nor received the same, the period of further investigation had been considered up to 31-10-2020. (b) Necessary verification of benefit passed on by the Respondent had been done. (c) The NAA directed the DGAP to investigate, compute and ensure that the applicable interest is also paid to all alight housebuyers. In this regard the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 emails/letters provided. It was verified that the Respondent had passed on an amount of Rs. 1,21,636/- to 7 homebuyers including an amount of Rs. 19,680/- passed on to the Applicant. However, it is observed that the Respondent is still required to pass on the benefit of ITC of GST of Rs. 6,32,28,455/- to 820 homebuyers including an amount of Rs. 37,877/- to the Applicant. XX. As aforementioned, the present investigation covers the period from 1-7-2017 to 31-10-2020. However, the Respondent had not received Occupation Certificate, and therefore profiteering, if any for the period past-October, 2020, had not been examined as the exact qusnturn of ITC that would be available to the Respondent in the future cannot be determined at this stage, when the construction of the proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 implementation of GST, however, since the taxes were eligible as ITC the impact of additional cost was nullified, but at no point, the company had gained anything just because ITC is eligible in the GST regime. The issue is also discussed in the paragraphs below. 2.3 Summary The summary of Post-and Pre-GST tax liabilities on outward and inward supplies is as follows: Act Outward Supply Inward Supply Service tax Exempt Sub-contractors. Exempt Others: Taxable VAT Taxable Taxable GST Taxable Taxable 3. Profiteered Amount Calculated By The DGAP The Respondent stated that the profiteered amount calculated by the DGAP cannot be accepted for the following reasons: (a) The meaning of the term "profiteered" in terms of sec 171 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 some specific answers which had no relevance with the facts of the present cases. 3.4 Comparing the incomparable The DGAP had also failed to appreciate that a mere difference in ITC availed pre-and post-GST cannot be said to be a benefit to the company. There were numerous factors which impact the real estate projects to illustrate subcontractor cost, steel cost cement cost etc. Further post-implementation of GST the effective rate of tax of certain specified goods and services had also increased from 12.5% or 15% to 18% or 28%. This additional amount of taxes would impact ITC to turnover ratio and thereby making the entire comparison arbitrary. 3.5 Using the same figures and mechanism for the two parts of the project The project consists of two parts wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 4,31,03,003,03 2,66,669,41 4,28,36,333,62 2 Cement & Steel 2,50,57,764,41 1,55,027,23 2,49,02,737,18 3 Other Services 37,56,043,23 23,237,87 37,32,805,36 4 Other Services 31,72,786,96 19,629,38 31,53,157,58 Total 7,50,89,597,63 4,64,563,88 7,46,25,033,75 3.11 From the four categories as provided in column B of table above, the company is not getting the "benefit of input tax credit" as explained above for the following categories namely: Category Effective ITC Remarks Subcontractor 42836333.62 Prior to the implementation of GST, no taxes were charged by the subcontractor and therefore there was no outflow of the company and accordingly no question of ITC. However, post-GST the sub-contractors were liable to charge GST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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% of which 6.84% is already provided as benefit. The said amount is much more than percentage of profiteered amount calculated for Project (Towers 1 to 9) of the Project. (b) The aspect of reduction of rate of inward supplies also does not apply for Part 2 of the project as the prices of cement and steel had increased multifold when compared to 2017. Basis above there cannot be any profiteering in Part 2 of the project. Further it is again reiterated than Part 2 of the Project is outside the scope of current notice and cannot be included in the same merely because of receipt of booking amount. 5. Copy of the above submissions dated 21-4-2022, filed by the respondent were supplied to the DGAP for supplementary Report under rule 133( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment 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 incorrected to say that in Real Estate Sector, there is no correlation of inward supplies (expense) and the outward supplies (receipts). Further, it is pertinent to mention here that the additional benefit of the ITC accrued at any given point of time is associated with the whole project whereas the benefit of ITC required to be passed on in terms of section 171 would be computed on proportions with the case sold and the actual amount to be passed on to each home could only be determined by factoring the demand raised from the buyers or advance received from them. Thus, the turnover considered for the computation of the profiteering pertains to the sold unit only in the project. Whereas the total ITC availed pertains to the entire project of the N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on 25-3-2020. However, the NAA referred back the matter under rule 133 (4) of the CGST Rules. 2017 and specifically directed the DGAP to further investigate the matter up to 31-10-2020. According further investigation in the mutter was carried out for the period from 1-7-2017 to 31-10-2020. Furthermore, to address the contention of the Respondent, a reasonably long period of 15 months in pre-GST period and 40 months in post-GST periods had been considered to compute the profiteering. Moreover, the ITC taken into consideration is proportionate with the area sold in respective periods. Therefore, the periods taken in pre-and post-GST were justifiable and were within the confines of the law. iv. The Respondent has alleged that DGAP has used wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 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 regime, the Respondent becomes eligible for more ITC in GST regime however, the rate of tax on outward supplies had also increased as compared to pre-GST regime. Hence this increased rate of GST is being charged by the Respondent from his customers/buyers. Therefore, at the time discharging of his tax liabilities the Respondent avails the additional ITC which had been increased in GST regime. Hence the Respondent was not required to pay even a single penny from his own pocket. Therefore, the methodology on the basis of the cost adopted by the Respondent in this regard cannot be accepted as it is not based on correct interpretation of the above provisions of section 171. However, cost of materials mentioned by the Respondent does not give an exact quantum of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of investigation covers all other recipients in that project. besides the Applicant. Hence, the contestation of the Respondent in this regard is not considered and investigation is carried out for both the parts of the project. Further, the averment made by the Respondent; that the completion certificate for the first part was received by the Respondent in July, 2021 is factually incorrect or if it is so, then the Respondent had suppressed the facts before DGAP. In this regard it is submitted that during further investigation in this case, the Respondent was asked for completion certificate of the project However, the Respondent submitted before the DGAP that he had applied for the same. The Respondent submitted various documents/information during further invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent 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 not allowed in the erstwhile tax regime, used to get embedded in the cost of the goods or services supplied, resulting in increased cost. With the introduction of GST with effect from 1-7-2017, all these taxes got subsumed in the GST and the ITC of GST became available in respect of all goods and services, unless specifically denied. Broadly, the additional benefit of ITC in the GST regime would be limited to those input taxes, the credit of which was not allowed in the pre-GST regime, but 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 GST Act, 2017. Therefore, on implementation of GST, the subcontractors also benefitted with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im 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 actual profiteering computed by the DGAP. xiii. The benefit of additional ITC available to the Respondent in post-GST regime under all the categories mentioned by the Respondent squarely falls within the ambit section 171 of the CGST Act, 2017. Therefore, the investigation carried out by the DGAP and report submitted on its findings are correct and within the scope of section 171 of the CGST Act, 2017, and rules made thereunder. xiv. with regards to contention of the Respondent regarding passing on the benefit with respect to Tower 10 it is to submit that during the course of further investigation of the case, the Respondent did not make such submissions before the DGAP that he had passed on the benefit of ITC to the buyers of Part 2 i.e. Tower 10 of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 the profiteering provisions were not applicable and the same is already held by this Hon'ble Authority in the following cases: a. Devroop Guha v. Signature Global (India) (P.) Ltd. b. Director General of Anti-Profiteering v. Alton Buildtech India (P.) Ltd. c. Darshan Joshi v. Lodha Developers Ltd. Though, the anti-profiteering provisions did not apply to the company it had itself reduced the price of the flats by 6.84% of the Total amount received and receivable from the buyers. Dispute 2; Considering the entire amount of ITC as benefit of ITC DGAP had failed to distinguish between the two terms ITC and Benefit of Input Tax Credit In this regard it is reiterated that, the objective of sec. 171 is to identify the benefit of ITC and not use a short-cut of using the entire ITC, therefore the ideal working would have been to classify the input tax credits availed by the company in the following categories: Cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 construction of the entire project was undertaken i.e. cement, steel and subcontractor services were being procured for the project as a whole and not for only those who people who had booked the flat. d. Further, since the project is an affordable housing project the installing get due on the basis of no of days and is not linked with even the construction of the project therefore even there is no construction in a period the outward supply might be there and there could be situation wherein there is no outward supply but there is huge flow of inward supply- Further, the Notification No. 3/2019 Central Tax Rate dated 26th March, 2019, which had stipulated percentage completion method for calculation of ITC allowance during the change in tax rate structure real estate projects. This was again required since the inward supplies and outward supplies in a particular tax period do not match with one another. Furthermore, since the inward supplies and outward s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cost. However, no step had been undertaken by the DGAP to calculate the benefit rather a flimsy method lacking in all parameters had been used to calculate the profit amount. The Respondent had submitted that the Authority had similar view in the case of Sumit Marsinghka v. E-Homes Infrastructure (P.) Ltd.. Dispute 6; Amount of Benefit passed by the company The company had stated that the total benefit that would be passed on by it for the entire project is Rs. 2.44 cr i.e. for both the parts and the relevant period would he from 1st July, 2017 to 31st Oct, 2020 and therefore the two values would not match. The company at various places had categorically specified that he was submitted values for the entire project since Part 1 of the project is completed and the second part of the project is outside the purview of sec 171 but for the DGAP these were irrelevant facts and required on consideration. As regards the evidence, the company stated that this is an affordable housing scheme where the pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 contradictory. The DGAP could not realize had the company accepted the entire ITC as benefit of ITC then there was no need for the submission since the company is of the firm belief that sec. 171 does not talk about entire ITC and but only benefit of ITC therefore the two figures could not be same. The DGAP had failed to appreciate that company had wilfully come forward to calculate the profiteered amount for the entire period of the project and not restrict it to Oct, 2020. Further, the company had accepted wherever the entire tax was earlier becoming cost but was eligible as credit in GST (Other services) and classified it as benefit of input tax credit. The company had also considered the benefit of cost reduction in case of works contractor and cement & steel which is the benefit due to implementation of GST and not benefit of ITC. However, the DGAP had not given any specific reasons as to why the said methodology is not in line with sec. 171. The DGAP had only referred that the working should had undertaken with entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 report which was upheld by the NAA on the grounds mentioned in Para 21 of the aforesaid order wherein the NAA observed that on the basis of the sequence of the above events it could safely concluded that the above project had been stted after coming into force of GST w.e.f. 1-7-2017 and further observed that since there is no basis for comparison of ITC available before and after 1-7-2017, the Respondent was not required to recalibrate the prices of flat due to availability of additional benefit of ITC. Hence, it is amply clear that in this case, since the entire project was launched in post-GST regime, the fact and circumstances of the Respondent's project was completely different from this case and hence same is not applicable to the Respondent's project. b. Director General of Anti-profiteering, CBDTS & Customs v. Alton Buildtech India (P.) Ltd. [2022] 137 taxmann.com 300 (NAA) In this case, an investigation report was submitted by the DGAP against the Respondent in respect of 'Angan' and videShashank T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the project 'Laxmi Apartment's of the Respondent is located in the same premises of the project for which no separate accounting of ITC is maintained by the Noticee. Therefore the inputs and inputs services intended/meant for Tower 1 to Tower 9 could be used for Tower 10 and also the ITC available in respect of Tower 10 only might have been availed at the time of discharging his tax liability i.r.o. of Tower 1 to Tower 9 or vice versa, Therefore, investigation carried out by the DGAP considering Tower 10 also is correct and quite justifiable and hence same is within the confines of law and practice followed. Furthermore, it is pertinent to mention here that the Respondent is contesting that since the Tower-10 was launched in post-GST regime, the profiteering provisions were not applicable to Tower-10 whereas in the homebuyers list submitted by the Respondent the Respondent had claimed that the benefit of ITC had been passed on to the buyers of Tower 10 also. Therefore the contention of the Respondent is not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 the Respondent renegotiated with his subcontractors and got reduction of 7% in the Constructors Bills post-GST. Therefore, in the similar situation (category 3 of the table), the Respondent is availing benefit of ITC from his subcontractors but in his own case, the Respondent is claiming that he is paying tax and thereafter taking credit and asserting same as tax neutral transaction. In fact, the GST paid on output is being borne by the homebuyers only. GST paid on inputs is being taken as ITC of GST. It appears that the Respondent is taking the benefit of ITC from all possible of ITC of GST to his customers/recipients. Dispute 3: Methodology adopted by DGAP of comparing ITC to Total Turnover The contention of the Respondent is not tenable as explained earlier, Further, the Respondent had contended that outward and inward supplies of real estate project was not co-related and to substantiate his claim the Respondent had relied upon his own project's fact that of cut of 804 units, mere 5 units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 "Composite supply of works contract as defined in clause (119) of section 2 of the CGST Act, 2017". The Respondent is supplying "Construction Service" to his recipients/homebuyers and is not supplying the "Works Contract Service". Therefore, the said Notification is applicable to the Respondent's subcontractors only who were supplying "Works Contract Service" to the Respondent as defined in clause (119) of section 2 of the CGST Act, 2017. Further, the applicable tax rate specified against the Sl. No. 3(v)(d) under column (4) of the table of the aforesaid Notification is 6% which is for the Central GST and similarly it is 6% for State GST as specified in similar Notification issued by the State Government (Haryana). Therefore, the effective rate of GST on the services mentioned at Sl No.3 (v)(d) of the Notification is 12% Further, it is pertinent to mention here that the provisions of Paragraph 2 of Notification No.11/2017-Central Tax (Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 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 amount of ITC claimed by the Respondent. In this context, it is pertinent to mention here that vide DGAP's Investigation Report, it was reported that the Respondent had not received Occupation Certificate and therefore profiteering, if any for the period post-October, 2020 was not examined as the exact quantum of ITC than would be available to the Respondent in future could not be determined at that stage, when the construction of the project was not completed. Accordingly, it was recommended in the report that in respect of the units/homebuyers in whose case agreement had been made prior to the receipt of Occupancy Certificate and where balance amount is yet to be demanded, the NAA might direct the Respondent to work out the element of profiteering on similar lines as discussed/calculated above and to pass on the benefit of ITC to the respective homebuyers. Now, since the Respondent had claimed more ITC for the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 pre-GST regime and the Respondent had obtained single RERA registration for the entire project. Since for the both the parts i.e., Tower 1 to Tower 9 and Twer-10 there was single RERA registration the second part i.e., Tower-10 cannot be spared from the current investigation on the mere basis that the construction of same commenced in July, 2021. Section 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 been 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 the regard is not tenable and the investigation has been correctly carried out for the entire Project by the DGA? Further, the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate 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 (supra). 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 profiteering 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. Hence, in this case also since the project was launched in post-GST regime for which the Respondent obtained the RERA Registration Certificate in post-GST regime only this case is not applicable to the Respondent's project as Tower-10 of the Respondent's project had no separate RERA Registration. Therefore this Authority finds that, the cases quoted by the Respondent in support of his claim are not applicable in the instant case and hence the claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the actual ITC attributable to the sold units, the proportionate 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 correct and just triable under the above provisions of section 171 of the CGST Act, 2017 and the methodology bas been approved by this Authority in other similar cases. IV. The Respondent has contended DGAP has been comparing the incomparable. The Respondent claimed that comparing ITC, of two periods cannot be the manner to identify the benefits of ITC, The Authority finds that, the ITC to Turnover ratio comparison is more relevant method to arrive at the correct profiteered amount. The cost of material in the subject case is immaterial as the Respondent had to just pass on the ITC benefit which had accrued to him on account of additional ITC to the customers in the post-GST period as computed to the pre-GST period Accordingly, while doing the calculation it is ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 turnover that was available to the Respondent during the pre-GST period (April-2016 to june-2017) was 1.61% and during the post-GST period (July-2017 to October-2020), it was 9.88% for the project "Laxmi Apartment's". This confirm that, post-GST the Respondent has been benefited from additional ITC to the tune of 8.27% [9.88% (-) 1.61%] of his turnover for the said project and the same was required to be passed on to the customer/flat buyers/recipients. The DGAP has calculated the amount of ITC benefit to be passed on to the customers/flat buyers/recipients as Rs. 6,33,70,091/- (which includes an amount of Rs. 57,557/- in relation to Applicant No 1) for the project "Laxmi Apartment", the details of which are mentioned in Table - B above. 11. Hence, the Authority finds no reason to differ from the above detailed computation of profiteered amount by the DGAP or the methodology adopted by it. The Authority finds that the Respondent has profiteered an amount of Rs. 6,33,70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement 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 Apartment" Location Gurugram. Haryana and amount of profiteering Rs. 6,33,70,091/- so that the Applicant along with Non-Applicants Homebuyer/recipients/customers can claim the benefit of ITC which has not been passed on to them. Homebuyer/recipients/customers only also be that this detailed NAA Order is available on Authority's website www.nna.gov.in. Contact details of concerned jurisdictional Commissioner CGST/SGST for compliance of this Authority's order may also be advertised through the said advertisement. 16. Further, this Authority as per rule 136 of the CGST Rules 2017 directs the concerned jurisdictional CGST/SGST Commissioner shall also submit a Report regarding the compliance of this order to the Authority and the DGAP within a period of 4 months from the date of receipt of this order. 17. The present investigation has been conducted up to 31-10-2020 only However, the Respondent has not obtained the Completion Certificate (CC) till ..... X X X X Extracts X X X X X X X X Extracts X X X X
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