Devroop Guha Vs Signature Global (India) Pvt. Ltd. (NAA)
Perusal of the record reveals that the Respondent had got Affordable Housing ‘The Millenia 37D’ project approved under the Haryana Affordable Housing Policy and allotted flats to the successful buyers on 27.10.2017 through draw of lots He invited applications for allotment of houses via advertisement in newspapers. The Applicant No. 1 had applied for allotment of a flat and the draw of lots for allotment of houses was conducted on 27.10.2017 in the presence of the committee constituted under the above Policy. It is also revealed that first builder buyer agreement was executed on 08.11.2017 vide which the terms and conditions for allotment of Flat were settled. It is also apparent from the record that the Respondent had received the Environment Clearance from the State Environment Impact Assessment Authority Haryana on 21.08.2017, also the work order for construction to contractor was given on 22.09.2017 before which he could not have started the execution of the project. On the basis of the sequence of the above events it could be safely concluded that the above project had been started after coming in to force of the GST w.e.f. 01.07.2017. It is also clear that the draw of lots for allotment was held on 27.10.2017. The first agreement between the buyer and the Respondent was executed on 08.11.2017. Therefore, was apparent that the Applicant No. 1 had applied for allotment and was allotted the above flat after coming in to force of the GST w.e.f. 01.07.2017. Since the above project was not under execution in the pre-GST period i.e. before 01.07.2017 therefore, no comparison could be made between the ITC which was unavailable to the Respondent before 01.07.2017 and after 01.07.2017 to determine whether the Respondent had benefitted from additional availability of ITC or not. From the above facts it are established that there had been no additional benefit of ITC to the Respondent and hence he was not required to pass on its benefit to the above Applicant No.1 by reducing the price of the flat. The Applicant No. 1 could have availed the above benefit only if the above project was under execution before coming in to force of the GST as the Respondent would have been eligible to avail ITC on the purchase of goods and services after 01.07.2017 on which he was not entitled to do so before the above date. Since there is no basis for comparison of ITC available before and after 01.07.2017, the Respondent was not required to recalibrate the price of the flat due to additional benefit of ITC. Hence, the allegations of the Applicant No.1 made in this behalf are incorrect and therefore, the same cannot be accepted.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 28.02.2020 has been received from Applicant No. 2, i.e. the Director-General of Anti-Profiteering (DGAP) after a detailed investigation in line with Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case are that Applicant No. 1 had filed an application under Rule 128 of the CGST Rules, 2017 alleging profiteering by the Respondent in respect of the supply of purchase of Flat No. 7-405 in Tower 7 in Respondent’s real estate project “The Millenia 37D” situated at Sector-37D, Gurugram, Haryana.
2. The DGAP has reported that Applicant No. 1 had alleged that the Respondent had not passed on the benefit of ITC to him by way of commensurate reduction in the price of his residential unit and that GST had been charged on the amounts due to him against payments to be made by him to the Respondent. Along with the application, Applicant No. 1 also submitted copies of demand letters issued by Respondent to him. On receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 09.10.2019, a Notice under Rule 129 of the Rules was issued by the DGAP o 22.10.2019, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to the recipients 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 furnish all documents in support of his reply. Further, the Respondent was allowed to inspect the non-confidential evidence/information which formed the basis of the said Notice, during the period 30.10.2019 or 31.10.2019. However, the Respondent did not avail of the opportunity. Further, vide his e-mail dated 24.01.2020, Applicant No. 1 was also given an opportunity by the DGAP to inspect the non-confidential documents/reply furnished by the Respondent on 03.02.2020 or 04.02.2020. Applicant No. 1 availed of the said opportunity by visiting DGAP’s office and inspecting and collecting the non-confidential documents on 04.02.2020. The period covered by the current investigation was from 01.07.2017 to 30.09.2019. The statutory time limit to complete the current investigation was on or before 08.04.2020 in terms of Rule 129(6) of the Rules.
3. DGAP has reported that in response to the notice dated 22.10.2019 the Respondent replied vide letter dated 26.11.2019 and his submissions were as follows:-
(i) That his case was a case of a company duly incorporated under the provisions of The Companies Act 1956. The Respondent was registered under the provisions of Haryana Value Added Tax Act, 2003 w.e.f 01.04.2020. During the period 01.04.2016 to 30.06.2017, the Respondent was engaged in Trading of Building Material besides executing civil works contracts for several builders within the State of Haryana.
(ii) That he had launched his first Affordable Housing Project namely “The Millenia” & allotted flats to the successful buyers on 27.10.2017 through a draw of lots under the scheme launched under the “Affordable Housing Policy 2013”.
(iii) That he had offered the rates for selling the residential units in his project, even before allotment, after due consideration of the GST paid/payable on goods & services involved in the execution of the contract as well as eligible GST credit, which could be set-off against output tax liability and the consideration for the sale of Flat was duly agreed between the Respondent and the buyer @ 4,000/- per sq. ft. on the carpet area, besides balcony area @ 500/- per sq. ft. Further, GST as applicable too was payable extra. The first Builder-Buyer agreement containing all the terms & conditions of Allotment was duly executed on 08.11.2017 between the Respondent and Applicant
(iv) That the construction activities on the aforesaid project were started on 25.09.2017 and hence during the GST regime.
(v) That it was pertinent to state that in the real estate sector, the Anti- Profiteering provisions stipulated in Section 171 of CGST Act read with Rules 122 to 137 of the CGST Rules applied to those units where the Builder-Buyer agreements were executed before the introduction of GST, i.e. in cases where the transfer of property in goods/services was partly made in pre-GST regime and balance was paid after the introduction of GST, to ensure that the benefit of additional ITC made available to the service provider upon introduction of the GST regime, which was not available or was a part of the cost in earlier regime, was duly transferred/passed on to the buyers.
(vi) That the Hon’ble Supreme Court in case of Larsen & Turbo Limited & others Vs State of Karnataka & other’s (2013) 65 VST 1 (SC)=2014 1 SCC 708) held that “The activity of construction undertaken by the developer etc. would be work contract only from the stage he entered into a contract with the flat Purchaser.”
(vii) That all the events including the allotment of the Flats on 27.10.2017, the agreement between him (the Respondent) & the Buyer duly executed on 08.11.2017 & construction activities started on 25.09.2017, occurred within the GST regime. The transaction between the builder & the buyer was covered by clause (b) of paragraph 5 of Schedule II of the CGST Act from the date the buyer was allotted the flat i.e. 27.10.2017 or the date of signing of Builder-Buyer Agreement whichever was earlier. Hence, the anti-profiteering provisions under the CGST Act could be applied in his case.
(viii) That, since there was a reduction in the rate of GST from 12% (after accounting for the abatement of land cost) to 8% (after accounting for the abatement of land cost) vide Notification No. 01/2018 Central Tax-Rate dated 25.01.2018 under the provisions of GST law; the benefit of reduction of tax from 12% to 8 % had already been given to the buyers. Hence, the provisions of Anti-Profiteering laws did not apply in his case.
4. The DGAP has reported that the Respondent submitted the following documents/ information:
(a) Copy of e Registration of his project with the RERA.
(b) Copy of the first Builder-Buyer Agreement duly executed between him and the first homebuyer.
(c) Copy of his Agreement with his Contractor.
(d) Copy of the Environment Clearance for the subject project.
(e) Copy of the advertisement for the Draw of Lots.’
(f) Copy of the result of the draw of lots published in a leading newspaper;
(g) Copy of Ledger Account of Applicant No. 1.
5. DGAP has reported that vide DGAP’s Notice dated 22.10.2019, the Respondent was informed that if any information/documents had been furnished by him to the DGAP on a confidential basis in terms of Rule 130 of the CGST Rules 2017, he was required to furnish a non-confidential summary of such information/documents. However, the Respondent did not classify any of the information/documents furnished by him before the DGAP as confidential in terms of Rule 130 of the Rules.
6. The DGAP has reported that the subject reference received from the Standing Committee on Anti-profiteering including the Application, the various replies of the Respondent, and the case records were carefully scrutinized. The main issues for determination were whether the Respondent had benefitted from the reduction in the rate of tax or by way of additional input tax credit (ITC) on his supplies upon implementation of GS with effect from 01.07.2017, and if so, whether such benefit was passed on by him to the homebuyers/ recipients in terms of Section 171 of the Central Goods and Services Tax Act, 2017. The Respondent, vide his letter dated 26.11.2019, submitted a copy of the ledger account for Flat no. 7-405, Tower-7, Floor -4 that he had sold to Applicant No. 1. The said flat measured 552.36 sq. ft. (plus 79.65 sq. ft. of balcony area), at a total basic sale price of Rs. 22,49,265/- (@Rs. 4000/- basic sale price per sq. ft. for super buildup area of 552.36 sq. ft. and Rs. 500 per sq. ft. for balcony area). The details of amounts and taxes paid by Applicant No. 1 to the Respondent were furnished in Table-A’ below:-
Table-`A’
(Amount in Rs.)
