In re Sh. Sandeep Kumar Vs Ms. Nani Resorts and Floriculture Pvt. Ltd. (National Anti-Profiteering Authority)
The present Report dated 22.04.2019, has been received on 23.04.2019 from the Applicant No. 8, i.e. the Director General of Anti-Profiteering (DGAP) after detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. Vide the above report, the DGAP has reported that an application dated 04.06.2018 was filed before the Haryana State Screening Committee on Anti-profiteering, under Rule 128 of the CGST Rules, 2017 by Applicant No. 1 alleging profiteering by the Respondent, in respect of purchase of a flat in the Respondent’s project “ROF Aalayas” in Sector-102, Gurgaon, Haryana. The Applicant No. 1 alleged that the Respondent did not pass on the benefit of input tax credit to him by way of commensurate reduction in price at the time of introduction of GST w.e.f. 01.07.2017. Along with the application, the above Applicant submitted copies of the demand letters issued to him by the Respondent.
2. The Haryana State Screening Committee on Anti-profiteering examined the aforesaid application in its meeting held on 20.06.2018 and observed that the burden of tax had reduced in the GST era due to increased availability of input tax credit, which the builder should have passed on to the recipients in terms of Section 171 of the Central Goods and Services Tax Act, 2017. The State Screening Committee referred the said application with its recommendations to the Standing Committee on Anti-profiteering on 27.06.2018 for further action in terms of Rule 128 of the Rules. The aforesaid reference was examined by the Standing Committee on Anti-profiteering in its meetings held on 07.08.2018 & 08.08.2018 and decided to forward the same to DGAP to conduct a detailed investigation in the matter. However, the complete set of documents related to the case was received by the DGAP only on 23.10.2018.
3. Further, six more applications by other applicants, hereinafter referred to as Applicants No. 2, 3, 4, 5, 6, and 7 containing similar allegations and pertaining to the same case were forwarded to the DGAP by the Standing Committee on Anti-profiteering.
4. Consequently, the DGAP issued a Notice under Rule 129 of the Rules on 26.10.2018 calling upon the Respondent to reply as to whether he admitted that the benefit of input tax credit had not been passed on to the Applicants by way of commensurate reduction in price and if so, to suo moto determine the quantum thereof and indicate the same in his reply to the Notice as well as to furnish all supporting documents pertaining to the matter. The period covered by the DGAP in the current investigation is from 01.07.2017 to 30.09.2018. In response to the Notice dated 26.10.2018, the Respondent submitted his reply in parts vide his letters and e-mails dated 19.11.2018, 22.11.2018, 06.12.2018, 14.12.2018, 20.12.2019, 10.04.2019 and 18.04.2019. The reply of the Respondent to the DGAP contained in the above communications, inter-alia was as follows: –
i. That he, i.e. the Respondent was engaged in development of residential/ commercial properties and had launched an Affordable Housing Project on 01.12.2015, under the scheme approved by the Government of Haryana, in Sector-111, Gurgaon.
ii. That he, i.e. the Respondent was directly engaged in construction activity and all the works related to the project were being undertaken on his own and that he procured the required raw materials on his own and claimed the credit of VAT paid on such purchases which was utilized to discharge his output VAT liability.
iii. That as per the provisions of Haryana Value Added Tax Act, 2003, “under-construction properties” were covered under the definition of Works Contract and attracted VAT@ 4.5% with full input tax credit of VAT paid on inputs purchased; that affordable housing had been exempt from Service Tax vide Notification No. 9/2016-ST dated 01.03.2016; that in the GST regime, construction of low cost houses up to a carpet area of 60 sq. mtr. per house, in a housing project approved by the State Government, attracted GST ©12% (effective GST @ 8% after 1/3rd abatement towards value of land) vide Notification No. 01/2018- Central Tax (Rate) dated 25.01.2018; that therefore, the total indirect tax burden on the project had increased by 3.5% after GST was introduced.
iv. That in the pre-GST regime, he was allowed to avail input tax credit of VAT paid to his vendors/ sub-contractors; that the affordable housing sale price of 4,000/- per sq.ft. was fixed after considering the benefit of input tax credit of VAT/WCT; that, however, the Central taxes, i.e., Central Excise Duty & Service Tax levied on the goods & services used in the execution of Works Contract, the credit of which was not available in the pre-GST regime, was part of the cost of the project; and that in the GST regime, input tax credit of GST paid on all goods and services was available to him.
v. That he, i.e. the Respondent was availing credit of Service Tax paid on the input services used towards the construction of the commercial project in the pre-GST period.
5. Vide the aforementioned letters and e-mails, the Respondent submitted the following documents/information:-
i. Copies of GSTR-1 returns for the period July, 2017 to September, 2018.
ii. Copies of GSTR-3B returns for the period July, 2017 to September, 2018.
iii. Screenshot of Tran-1 return duly filed on GSTN.
iv. Copies of ST-3 returns for the period April, 2016 to June, 2017.
v. Copies of VAT returns for the period April, 2016 to Mar, 2017.
vi. Copies of all demand letters issued in the name of the Applicants No. 1 & No. 2.
vii. Details of applicable tax rates, pre-GST and post-GST.
viii. Copy of Audited Balance Sheet for the FY 2016-17 and FY 2017-18.
ix. Copy of Registration with Haryana RERA.
x. Copy of Electronic Credit Ledger for the period 01.07.2017 to 09.2018.
xi. Reconciliation of turnover reported in GSTR-3B with that in the list of home buyers.
6. The Respondent, vide letter dated 16.11.2018, submitted copies of demand letters and the payment schedule in respect of the Applicants No. 1 & No. 2, in respect of their purchase of flats measuring 535.40 square feet each, at the basic sale price of 4,000/- per square feet; that the details of amounts and taxes paid by the Applicant No. 1 to him are furnished in table-‘A’ below.
Table-`A’
(Amount in)
