Sh. Santha Sivaram Vs Virgo Properties Pvt. Ltd. (National Anti-Profiteering Authority)
We have carefully considered all the submissions filed by the Applicant No. 1, the Respondent and the other material placed on record and find that the Applicant No. 1, vide his complaint dated 05.04.2018 had alleged that the Respondent was not passing on the benefit of ITC to him in spite of the fact that he was availing ITC on the purchase of the inputs at higher rates of GST which had resulted in benefit of additional ITC to him and was also charging GST from him @12%. The above complaint was investigated by the DGAP and vide his Report dated 15.02.2019, he has found that the ITC as a percentage of the total turnover which was available to the Respondent during the pre GST period was 0.42% and during the post GST period the ratio was 3.89% as per the Table C mentioned above and therefore, the Respondent had benefited from additional ITC to the tune of 3.47% (3.89% – 0.42%) of the total turnover which he was required to pass on to the flat buyers of this project. The DGAP has also found that the Respondent has not reduced the basic prices of his flats by 3.47% due to additional benefit of ITC and by charging GST at the increased rate of 12% on the pre GST basic price, he has contravened the provisions of Section 171 of the CGST Act, 2017. The DGAP has further submitted that the amount of benefit of ITC which has not been passed on by the Respondent or the profiteered amount came to Rs. 97,40,448/- which included GST (@ 18%, 12%, 8%) on the basic profiteered amount of Rs. 87,06,553/-. The DGAP has also intimated that this amount of profiteering also included the profiteered amount of Rs. 33,972/- including 18% GST on the base amount of Rs. 28,790/- in respect of the Applicant No. 1. He has also supplied the details of all the buyers who have purchased flats from the Respondent along with their unit numbers and the profiteered amount vide Annexure-23 attached with the Report.
Further, we observe that the DGAP vide his reports dated 14.02.2019, 27.03.2019 and 11.06.2019 has addressed all the objections raised by the Respondent and the explanations given by the DGAP are correct and can be relied upon. Though some of the major contentions of the Respondent are discussed in subsequent paras.
We note that one of his prime contentions against the DGAP’s report is that the credit of VAT paid on inputs has not been considered. We find that this claim of the Respondent is incorrect since though the Respondent had claimed credit of VAT paid on the inputs, but he had not discharged any output VAT liability. Further, Respondent also did not charged/paid VAT in the pre-GST period from the home-buyers. Thus, for determining the profiteering amount, neither the credit of VAT paid on the inputs, nor the output VAT liability had been taken into consideration by the DGAP and thus, DGAP has rightly computed the profiteering in this aspect.
Further, we observe that the objection raised by the Respondent to exclude Land value from the turnover of post-GST period is not correct as the DGAP had compared the total turnover (inclusive of land value) of the Respondent for the pre as well as post-GST periods and the value of land was also included in post-GST turnover as the Respondent had been paying GST at the effective rate of 12% on the total turnover. Therefore, the objections raised by the Respondent are not sustainable and cannot be accepted.
Further, the Respondent has claimed that he had duly passed on ITC benefit of an amount of Rs. 92,38,515/- (Rs. 65,41,634 upto 01.08.2018 and Rs. 26,96,881/- after 01.08.2018 till the date of submissions) to the eligible customers. However, the computation of calculating this amount has not been provided by the Respondent. The Respondent has also not supplied any reliable and cogent proof that the above benefit has been received by the eligible buyers nor his claim has been verified by the DGAP and hence the above claim of the Respondent cannot be accepted.
We find that it is established from the perusal of the above facts that the provisions of Section 171 of the CGST Act, 2017 have been contravened by the Respondent as he has profiteered an amount of Rs. 97,40,448/- inclusive of GST (@ 18%, 12%, 8%) on the base profiteered amount of Rs. 87,06,553/-. Further, the Respondent has realized an additional amount of Rs. 33,972/- which includes both the profiteered amount @3.47% of the taxable amount (base price) and 18% GST on the said profiteered amount from the Applicant No. 1. Further, he has realized an additional amount of Rs. 97,06,476/- which includes both the profiteered amount @3.47% of the taxable amount (base price) and GST (@ 18%, 12% 8%) on the said profiteered amount from the flat buyers other than the Applicants in the present proceedings as per Annexure-23 of the Report. These buyers are identifiable as per the documents placed on record and therefore, the Respondent is directed to pass on this amount of Rs. 97,40,448/-along with interest @18% per annum to these flat buyers from the dates from which the above amount was collected by him from these buyers till the payment is made, within a period of 3 months from the date of passing of this order.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
The present Report dated 15.02.2019 has been received from the Applicant No. 2 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. The brief facts of the case are that vide his application dated 05.04.2018 filed before the Tamil Nadu State Screening Committee on Anti-profiteering under Rule 128 (2) of the CGST Rules, 2017, the Applicant No. 1 had alleged profiteering by the Respondent in respect of purchase of Flat in the Respondent’s project ‘Bounty Acres’, Unit No 3-406, Block-3, Bounty Acres, Kovilambakkam, Chennai, Tamil Nadu 600091. The above Applicant had also alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) availed by him by way of commensurate reduction in the price of the above flat. The Tamil Nadu State Screening Committee on Anti-profiteering had examined the said application and upon being satisfied that the Respondent had contravened the provisions of Section 171 of the Central Goods and Services Tax Act, 2017, forwarded the same with its recommendation to the Standing Committee on Anti-profiteering on 29.06.2018 for further action, in terms of Rule 128 of the Central Goods and Services Tax Rules, 2017. The aforesaid reference was considered by the Standing Committee on Anti-profiteering, in its meeting held on 07th & 08th August 2018, wherein it was decided to forward the same to the DGAP to conduct detailed investigation as per the provisions of Rule 129 (1) of the CGST Rules, 2017.
2. The Applicant had furnished the following documents along with his application:-
a) Duly filled in Form APAF-1.
b) Copies of Payment Schedule of both pre-GST & post-GST periods.
c) Copy of the Demand letters.
d) Copy of identity proof (Aadhar Card).
3. On receipt of the recommendation from the Standing Committee on Anti-profiteering, the DGAP had issued Notice dated 11.09.2018 under Rule 129 (3) of the above Rules, asking the Respondent to intimate as to whether he admitted that the benefit of ITC had not been passed on to the above Applicant by way of commensurate reduction in the price of the flat and in case it was so, to suo moto compute the quantum of the same and mention it in his reply to the Notice along with the supporting documents. The Respondent was given an opportunity to inspect the non-confidential evidence/information furnished by the above Applicant during the period between 17.09.2018 to 19.09.2018 in accordance with Rule 129 (5) of the above Rulesand he availed of the said opportunity and inspected the documents on 17.09.2018. Vide e-mail dated 08.01.2019, the above Applicant was also given an opportunity to inspect the non-confidential documents/reply submitted by the Respondent on 14.01.2019 to 16.01.2019. However, the Applicant did not avail of the said opportunityand vide email dated 11.01.2019, expressed his inability to do so.
4. The DGAP has covered the period from 01.07.2017 to 31.08.2018 during the current investigation. The time limit to complete the investigation was extended by this Authority, vide its orders dated 29.01.2019. in terms of Rule 129(6) of the Rules.
5. The DGAP has further stated that the Respondent had submitted replies vide his letters/emails dated 24.09.2018, 10.10.2018, 23.10.2018, 31.10.2018, 17.11.2018, 27.12.2018, 31.12.2018, 04.01.2019, 07.01.2019, 08.01.2019, 09.01.2019, 11.01.2019 and 01.02.2019. The submissions of the Respondent were summed up by the DGAP as under:-
a) That he had made two separate Agreements for the flats booked in the pre-GST regime, one for land value and the other for construction value and he was charging GST @ 18% on the balance consideration of construction value. His land related sale and registration were completed during the pre-GST period, while construction service was rendered and consideration related to construction was received during the pre-GST as well as post-GST periods. In other words, the supply of service did not involve transfer of land during the GST period. Thus, there was no case of deducting 1/3rd value (in lieu of land) from the gross value (land price plus construction price) and paying GST @ 18% on such balance 2/3rd value (effective GST @ 12%). He further submitted that if he had claimed abatement of 1/3rd value of his construction receipt during GST regime, it would have been improper since the entire consideration was related to construction only and therefore, GST collected @ 18% on the construction value was remitted to the Government account.
b) That the Respondent had requested to consider his Tamil Nadu VAT ITC which was available to him under the erstwhile law, while comparing the ITC benefit of pre-GST and post-GST periods. He had opted to pay TNVAT and had been permitted to collect VAT as well as avail the ITC of VAT on input materials purchased.
c) That he had substantially reduced the price of the apartments sold by him in the post-GST period.
6. The Respondent had also submitted the following documents/information to the DGAP vide his above mentioned letters/e-mails during the course of the investigation:-
(a) Copies of GSTR-1 returns for the period July, 2017 to August, 2018.
(b) Copies of GSTR-3B returns for the period July, 2017 to August, 2018.
(c) Copies of Tran-1.
(d) Copies of VAT & ST-3 returns for the period April, 2016 to June, 2017.
(e) Electronic Credit ledger for the period July, 2017 to August, 2018.
(f) Copies of all demand letters, receipts and agreement/contract in the name of the Applicant Ms. Santha Sivaram.
(g) Tax rates- pre-GST and post-GST.
(h) Details of taxable turnover and input tax credit for the project “Bounty Acres”.
(i) List of home buyers in the project ” Bounty Acres”.
7. The DGAP has also stated that all the documents placed on record were carefully examined by him and he had found that the main issues for determination were whether there was reduction in the rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and in case it was so, whether the Respondent had passed on the above benefits to the home buyers as per the provisions of Section 171 of the CGST Act, 2017 or not.
8. The DGAP has further stated that the Respondent vide email dated 10.10.2018, had submitted copies of demand letters and the payment schedule related to the purchase of an apartment by the Applicant, measuring 996 sq. ft., at the basic sale price of Rs. 4900/- per sq. ft. for the construction part and Rs. 2500 per sq. ft. for 476 sq. ft. towards the land share of the Applicant. The details of amounts and taxes paid by the Applicant to the Respondent were furnished by the DGAP as in Table-A’ below.
