Sh. Ritesh Kumar Khandelwal Vs Forever Buildtech Pvt. Ltd. (NAA)
Authority finds that the allotment of units, agreements, booking, construction activity and receipt of payments had taken place in the post-GST era. The draw of lots for allotment of houses was conducted on 05.07.2017 in the presence of the committee constituted under the Affordable Housing Policy, 2013. The Authority also finds that first BBA between the flat buyers & the Respondent was executed on 20.07.2017 in the post GST period. On the basis of the sequence of the above events, it could be safely concluded that the above project had started after coming in to force of the GST w.e.f. 01.07.2017 and Applicants were allotted flats only after coming in to force of the GST w.e.f. 01.07.2017, as the allotment cum first tax invoice for demand was issued after the implementation of the GST w.e.f. 01.07.2017, hence apparently there was no pre-GST tax rate or input tax credit availability that could be compared with the post-GST tax rate and the input tax credit, to determine whether there was any benefit that was required to be passed on by way of reduced price.
From the above facts it is established that there had been no additional benefit of ITC to the Respondent and hence he is not required to pass on the benefit to the above Applicants by reducing the prices of the flats. The Applicants could have availed the above benefit only if the above project was under execution/implementation before coming into 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 is not required to recalibrate the price of the flats due to additional benefit of ITC. Hence, the allegations of the above Applicants made in this behalf are incorrect and therefore, the same cannot be accepted.
Based on the above facts the Authority finds that the Respondent had not contravened the provisions of Section 171 (1) of the CGST Act, 2017 and we find no merit in the Applications filed by the above Applicants and the same are accordingly dismissed.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
The Present Report dated 31.03.2021 had been received from the Director General of Anti-Profiteering (DGAP) after investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017.
2. The DGAP vide the above said Report dated 31.03.2021 has inter-alia stated the following:- ‘
i. The Standing Committee on Anti-profiteering, received 4 Applications under Rule 128 of the Central Goods and Services Tax Rules, 2017, filed by Applicant No. 1, 2, 3 and 4 alleging profiteering in respect of construction service supplied by the Respondent. The above Applicants alleged that the Respondent had not passed on the benefit of input tax credit to them by way of commensurate reduction in the price in the project “The Roselia Sector-95A” situated at Gurugram, Haryana in terms of Section 171 of the Central Goods and Services Tax Act, 2017.
ii. The aforesaid applications were examined by the Standing Committee on Anti-profiteering, in its meeting whereby it was decided to forward the same to DGAP to conduct a detailed investigation in the matter.
iii. On receipt of the reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129 of the Rules was issued by the DGAP on 17.12.2020, 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 above Applicants by way of commensurate reduction in prices 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 supporting documents. Vide the said Notice, the Respondent was also given an opportunity to inspect the non-confidential evidences/information furnished by the Applicants during the period 28.12.2020 to 30.12.2020. However, the Respondent did not avail of this opportunity.
iv. The period covered by the current investigation was from 01.07.2017 to 30.11.2020. The time limit to complete the investigation was 23.05.2021.
v. In response to the Notice dated 17.12.2020, the Respondent submitted his reply vide letters/e-mails dated 22.01.2021, 19.02.2021, 05.03.2021 and 25.03.2021. The Respondent placed the following facts to establish that he was not covered under the provision of Section 171 of CGST Act, 2017 and the submissions of the Respondent were as follows:
(a) The provisions of section 171(1) which had been placed in Chapter XXI of the Central Goods and Service Tax Act pertaining to “Miscellaneous” provisions state the following: ”Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.”
On the reading of above provisions of the section, it was clear that the provision of Section 171 of CGST Act, shall apply only in two cases:
I. Reduction in rate of tax, and
II. The benefit of ITC by way of commensurate reduction in price was to be passed on to the recipient.
(b) The agreement between the Respondent and the buyers of residential project was executed on 20.07.2017, vide which the terms & condition for the allotment, consideration including taxes & other conditions had been mentioned.
(c) All the events i.e. allotment of the Flats on 05.07.2017, agreement between the Respondent & the Buyer duly executed on 20.07.2017 & construction activities started on 15.11.2017, occurred after introduction of GST. 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. 05.07.2017 or the date of signing of Builder-Buyer Agreement whichever was earlier.
(d) The Respondent had submitted the following preliminary objection, and requested to dispose-off the same by passing speaking order, before proceeding with the investigation. “Whether the Anti-profiteering proceeding can be initiated on the project where Allotment/Builder Buyers Agreement & the construction activities were made/ executed in GST period?” Without prejudice to preliminary objection, in case the DGAP, still decided to proceed with the investigation, it was requested to dispose off the above mentioned objection by passing speaking order in view of well settle law in case of M/s GKN Driveshafts (India) Ltd. (2002) 1SCC 72. Relevant para of the judgment was reproduced below:
“However, we clarify that when a notice under Section 148 of the Income Tax Act was issued, the proper course of action for the noticee was to file return and if he so desires, to seek reasons for issuing notice. The assessing officer was bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee was entitled to file objections to issuance of notice and the assessing officer was bound to dispose of the same by passing a speaking order. In the instant case, as the reasons had been disclosed in these proceedings, the assessing officer had to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years”
(e) The Respondent was engaged in the real estate business activities including development and sale of residential/commercial properties. The Respondent launched its Second Affordable Housing Project namely “The Roselia Sector-95A” & allotment of the flats was made on 05.07.2017 under the “Haryana Affordable Housing Policy 2013′
(f) The Builder Buyer Agreement (BBA) of residential project was executed on 20.07.2017. Similarly, BBA in respect of Commercial Units sold was first executed on 19.06.2018 i.e. during post GST period.
(g) The “Respondent offered the rates for selling flats on allotment, after due consideration of GST paid/payable on goods & services involved in the execution of the Contract as well as eligible GST credit, which can be set-off against output tax liability.
(h) Consideration for the sale of Flat was duly agreed between Respondent and buyer @ 4,000/- per square feet on carpet area basis, besides balcony area @ 500/- per square feet. Further, GST as applicable too was payable extra. The Builder-Buyer agreement containing all the terms & conditions of allotment was duly executed on 20.07.2017 onwards between the Respondent & the successful applicant.
(i) The construction activities on the aforesaid project were started on 15.11.2017 and thereafter, during GST regime.
(j) Vide the aforementioned letters, the Respondent submitted the following documents/information:
