Raju Mittal Vs Shriram Properties Pvt. Ltd (NAA)
The Applicant No. 1 alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price of the Unit No. 03-401 purchased from the Respondent in the project Shriram Summit, situated at Golahalli Electronic City, Bangalore on introduction of GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017.
The Authority finds that the Respondent has profiteered by an amount of Rs. 20,57,207/- during the period of investigation i.e. 01.07.2017 to 30.04.2020. The Authority determines an amount of Rs. 20,57,207/- (including 12% asp under section 133(1) as the profiteered amount by the Respondent from his 1061 home buyers (as per Annexure A to this Order), including Applicant Nos. 1 to 4, which shall be refunded by him along with interest @18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in accordance with the provisions of Rule 133 (3) (b) of the CGST Rules 2017. This amount profiteered is Rs. 1,581/- (including CST) in respect of the Applicant No.1, Rs 3161- (including (ST) in respect of Applicant No. 2, Rs 1,166/- (including GST) in respect of Applicant No. 3, and Rs 1,239/- (including GST) in respect of the Applicant No. 4.
This Authority under Rule 133 (3) (a) of the COS'[ Rules, 2017 orders that the Respondent shall reduce the prices to be realized from the buyers of the flats commensurate with the benefit of ITC received by him as has been detailed above.
The Respondent is also liable to pay interest as applicable on the entire amount profiteered, i.e. Rs. 20,57,207/-, for the project `Shriram Summit’. Hence the Respondent is directed to also pass on interest @18% to the customers/ flat buyers/ recipients on the entire amount profiteered, starting from the date from which the above amount was profiteered till the date of passing on/ payment, as per provisions of Rule 133 (3) (b) of the COST Rules, 2017.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present report dated 31.03.2021 has been furnished by the Director General of Anti-Profiteering (DGAP), under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017, on the basis of application filed by the Applicant No. 1 alleging profiteering in respect of Construction Service supplied by the Respondent. The Applicant No. 1 alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price of the Unit No. 03-401 purchased from the Respondent in the project “Shriram Summit”, situated at Golahalli Electronic City, Bangalore on introduction of GST w.e.f. 01.07.2017, in terms of Section 171 of the CGST Act, 2017.
2. Vide the above mentioned Report dated 31.03.2021, the DGAP has inter-alia stated that:-
a. The Karnataka State Screening Committee on Anti-profiteering examined the said application and forwarded the said application with its recommendation, to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the Rules.
b. The aforesaid Application was examined by the Standing Committee on Anti-profiteering. Thereafter, it decided to forward the same to the .DGAP to conduct a detailed investigation in the matter. Accordingly, investigation was initiated to collect evidence necessary to determine whether the benefit of ITC had been passed on by the Respondent to the Applicant No. I in respect of Construction Service supplied by the Respondent.
h. in response to the Notice dated 26.05.2020 and several reminders & summonses, the Respondent submitted his reply vide letters/c-mails dated 09.06.2020, 07.08.2020, 11.09.2020, 17.11.2020, 07.01.2021, 27.01.2021, 19.02.2021, 16.03.2021, 17.03.2021, and 24.03.2021. The replies of the Respondent have been summarized by the DGAP as below wherein the Respondent has submitted:-
i) That he was a real estate developer and engaged in the business of development of residential apartments. The Respondent was also engaged in providing development management services for other projects and had also developed multiple projects in pre GST and post GST periods.
ii) The Respondent stated that the project “Shriram summit” was in the category of budget homes in Bangalore which an average middle class buyer could easily afford. Keeping the same in mind, very thin margin was kept in the project. Further, pre-GST, he was eligible to avail credits of VAT and Service Tax and hence there would be very minimal chance of increase in credits clue to introduction of (1ST. The prices of goods like Steel and Cement had increased multi-fold while there had been no additional consideration collected from the customers.
i. Vide the aforementioned letters, the Respondent submitted the following documents/information:
(i) Copies of GSTR-1 Returns for the period July, 2017 to April, 2020.
(ii) Copies of GS’TR-313 Returns for the period July, 2017 to April, 2020.
(iii) Electronic Credit Ledger for the period July, 2017 to April, 2020.
(iv) Copies of VAT returns (including all annexures) & ST-3 returns for the period April, 2016 to June, 2017.
c. Further, the Standing Committee on Anti-profiteering, forwarded another application, filed by Applicant No. 2, 3 & 4 against the Respondent, in respect of purchase of a flat, in the project “Shriram Summit”.
d. On receipt of the references from the Standing Committee on Anti-profiteering on 06.05.2020, a Notice under Rule 129 of the Rules was issued by the DGAP on 26.05.2020, calling upon the Respondent to reply as to whether he admited that the benefit of ITC had not been passed on to the Applicant Nos. 1 to 4 by way of commensurate reduction in prices and if so, to suo mow 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 Applicant No. 1, during the period 04.06.2020 to 06.06.2020. However, the Respondent did not avail of this opportunity.
e. In response to the Notice and several reminder letters, the Respondent did not submit all the requisite documents on the due date. Hence, three Summons under Section 70 of the CGST Act, 2017 read with Rule 132 of the Rules, were issued to the Respondent to submit all the relevant documents. In compliance of said summons, the Respondent submitted the relevant documents as mentioned in the subsequent paragraphs.
f. The period covered by the current investigation was from 01.07.2017 to 30.04.2020.
g. The time limit to complete the investigation was 05.11.2020. However, in terms of Rule 129(6) of the Rules vide, Notification No. 65/2020- Central Tax dated 01.09.2020 and Notification No. 91/2020- Central Tax dated 14.12.2020 the time limit for compliance was extended up to 31.03.2021.
(v) Copies of all demand letters/agreements issued to the Applicant Nos. 1 to 4.
(vi) Details of VAT, Service Tax, ITC of VAT, Cenvat credit for the period April, 2016 to June,2017 and output GST and ITC of GST for the period July, 2017 to April, 2020 for the project “Shriram Summit”.
(vii) Cenvat/ITC Register for the FY 2016-17, 2017-18, 201819 and for the period April, 2019 to April, 2020 for the project “Shriram Summit”.
(viii)List of home buyers in the project “Shriram Summit”.
(ix) Brief profile of the Respondent.
(x) Details of applicable tax rates, Pre-GST and Post-GST.
(xi) Status of Project as on 30.04.2020.
j. In the Notice dated 26.05.2020, the Respondent was informed that if any information/documents was provided on confidential basis, in terms of Rule 130 of the Rules, a non-confidential summary or such information/documents was required to be furnished. However, the Respondent informed that all documents provided by the Respondent, might be treated as confidential except documents related to the Applicant Nos. 1 to 4 only.
k. Vide e-mail dated 18.03.2021, an opportunity was given to the Applicant Nos. 1 to 4 to inspect the non-confidential documents/reply furnished by the Respondent on 19.03.2021 to 22.03.2021. However, the above Applicants did not avail the said opportunity.
l. After examining the subject applications, various replies of the Respondent and the documents/evidences on record, the DGAP observed that the main issues for determination were: –
i) Whether there was benefit of reduction in rate of tax or ITC on the supply of Construction Service by the Respondent after implementation of GST w.e.f. 01.07.2017 and if so,
ii) Whether the Respondent passed on such benefit to the recipients by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017.
m. Another relevant point in this regard was pars 5 of Schedule-Ill of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) which reads as “Sale of land and, subject to clause (b) of paragraph S of Schedule II, sale of building”. Further, clause (b) of Paragraph 5 of Schedule IT of the CGST Act, 2017 reads as “(b) construction of a complex, building, civil structure or a part thereof including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration had been received after issuance of completion certificate. where required, by the competent authority or after his first occupation, whichever was earlier”. Thus, the 1TC pertaining to the residential units which was under construction but not sold was provisional Fit which might be required to be reversed by the Respondent if such units remain unsold at the time of issue of the completion certificate, in terms of Section 17(2) & Section 17(3) of the CGST Act, 2017, which read as under:
Section 17 (2) “Where the goods or services or both was used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempted supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as was attributable to the said taxable supplies including zero-rated supplies”.
Section 17 (3) “The value of exempted supply under sub-section (2) shall be such as might be prescribed and shall include supplies on which the recipient was liable to pay tar on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph S of Schedule II, sale of building”.
Therefore, the ITC pertaining to the unsold units might not fall within the ambit of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to him post-GST.
n. It was observed by the DGAP that prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail credit of Service Tax paid on the input services as well as credit of VAT purchases (CENVAT credit of Central Excise Duty was not available) in respect of the flats for the project “Shriram Summit” sold by him. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. From the data submitted by the Respondent covering the period April, 2016 to April, 2020, the details of the ITC availed by him, his turnovers from the project “Shriram Summit”, the ratios of ITCs to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to April, 2020) periods, have been furnished in Table-‘A’ below:-
Table- ‘A’ (Amount in Its.)
