Sushil Kumar Jain Vs Sarvpriya Securities Pvt. Ltd. (National Anti-Profiteering Authority)
Based on the above facts it is clear that the ITC as a percentage of the turnover that was available to the Respondent during the pre-GST period from April, 2016 to June, 2017 was 4.75% and during the post-GST period from July, 2017 to December, 2018, it was 15.40% as per Table B supra and hence it is established that the Respondent has benefited from the additional ITC to the extent of 10.65% [15.40% (-) 4.75%] of the turnover. Since, the above computations made in Table B have been done on the basis of the records, information and returns furnished by the Respondent himself, the same can be relied upon.
It is also clear from the records that the Central Government, on the recommendation of the GST Council, had levied 18% GST with effective rate of 12% in view of 1/3rd abatement on value on the construction service, vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 which was reduced in the case of affordable housing from 12% to 8%, vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. Accordingly, the DGAP has computed the profiteering by comparing the applicable tax rate and ITC available in the pre-GST period when only VAT@ 4.50% was payable with (1) the post-GST period from 01.07.2017 to 24.01.2018, when the effective GST rate was 12% and (2) with the GST period from 25.01.2018 to 31.12.2018, when the effective GST rate was 8%. Accordingly, the DGAP has calculated the profiteered amount or the benefit to be passed on for the period from 01.07.2017 to 24.01.2018, as Rs. 2,88,98,231/- for the residential flats and commercial shops, which includes 12% GST on the base profiteered amount of Rs. 2,58,01,992/-. He has also computed the amount of benefit of ITC or the profiteered amount that needs to be passed on by the Respondent to his recipients during the period from 25.01.2018 to 31.12.2018 as Rs. 7,07,20,406/- which includes 12% GST on commercial shops and 8% GST on residential flats, on the base profiteered amount of Rs. 6,52,80,958/-. Therefore, the total benefit of ITC which is required to be passed on during the period from 01.07.2017 to 31.12.2018, comes to Rs. 9,96,18,637/- which includes GST @ 12% or 8% on the base profiteered amount of Rs. 9,10,82,950/- as per Table C of the above Report. The home buyer and unit no. wise break-up of this amount has been given by the DGAP vide Annexure-14 of his Report. This amount is inclusive of profiteered amount in respect of the Applicant No. 1. Since, Table C has been prepared on the basis of the information reflected in the Returns filed by the above Respondent and the details submitted by him hence, the computations made in the above Table are taken to be correct and accordingly the profiteered amount is determined as Rs. 9,96,18,637/- as per the details mentioned above in terms of the provisions of Rule 133 (1) of the CGST Rules, 2017.
In view of the above facts this Authority under Rule 133 (3) (a) of the CGST 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 mentioned in detail of the preceding paras of this Order. As per the provisions of Rule 133 (1) (b) of the CGST Rules, 2017 it is further ordered that the Respondent shall refund the above profiteered amount to the flat buyers as per the details given by the DGAP in Annexure-14 without taking in to account the benefit which he has claimed to have passed The above amount shall be passed on by the Respondent along with interest @18% payable from the date from which the excess amount was collected by the Respondent from the buyers till the date of its payment within a period of 3 months from the date of this order failing which the same shall be recovered by the concerned Commissioner CGST/SGST and paid to the eligible house buyers as per their entitlement as per the provisions of CGST/SGST Acts.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING APPELLATE AUTHORITY
1. The present Report dated 14.06.2019 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 the Applicant No. 1 had filed an application before the Haryana State Screening Committee on Anti-profiteering, under Rule 128 of the Central Goods and Services Tax Rules, 2017 and submitted that he had purchased a flat in the Respondent’s project “Andour Heights”, Sector-71, Gurgaon and alleged that the Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in price, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. While filing his application, he had sought anonymity. The Haryana State Screening Committee on Anti-profiteering conducted prima facie verification of the application and after having satisfied itself that the Respondent did not appear to have passed on the benefit of ITC, forwarded the said application with its recommendation to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the above Rules.
2. The Standing Committee on Anti-profiteering examined the aforesaid reference, in its meeting held on 13.12.2018 and it forwarded the same to the DGAP for detailed investigation.
3. The DGAP, on receipt of the application and the supporting documents from the Standing Committee on Anti-profiteering, issued a Notice under Rule 129 of the CGST Rules, 2017 on 15.01.2019 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 Applicant No. 1 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 supporting documents. Vide the above mentioned notice 15.01.2019, the Respondent was also given an opportunity to inspect the non-confidential evidences/information furnished by the Applicant No. 1 during the period 21.01.2019 to 23.01.2019.
4. Vide e-mail dated 22.05.2019, the DGAP also provided the Applicant 1 an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on 24.05.2019, 27.05.2019 & 28.05.2019, which the Applicant No. 1 availed of on 27.05.2019 and requested that he be supplied copies of all the documents submitted by the Respondent, including GSTR-1 and GSTR-3B returns.
5. The period of the investigation conducted by the DGAP in this case is from 01.07.2017 to 31.08.2018.
6. The DGAP sought extension of time for completing the investigation which was duly extended by this Authority vide its order dated 19.03.2019 in terms of rule 129(6) of the CGST Rules, 2017.
7. The DGAP, in his report dated 14.06.2019, stated that the Respondent had filed his submissions vide letters/emails dated 06.02.2019, 02.2019, 10.04.2019, 12.04.2019, 13.05.2019 and 06.06.2019 vide which the Respondent had stated that his Company was incorporated under the provisions of Companies Act, 1956 and was engaged in development of residential/commercial properties. The Respondent had launched an Affordable Housing Project “Andour Heights” on 18.08.2015, under the Affordable Housing Scheme approved by the State of Haryana in Sector 71, Gurgaon. Thereafter, as per applicable Rules, applications were invited from eligible buyers for the project and the Respondent allotted units/ flats through draw of lots. Accordingly, the builder-buyer agreements were jointly signed, affirming all the terms and conditions applicable.
8. The Respondent added that under the Affordable Housing Scheme approved by the State of Haryana, the selling price of the units/ flats was fixed at Rs. 4,000/- per square feet of carpet area and Rs. 500/-per square feet of balcony area. The Respondent was developing two BHK & one BHK apartments. As per applicable Rules, the Respondent raised demands on the buyers to the extent of 62.50% of total cost of the flat before 30.06.2017, taxguru.in under the erstwhile VAT/Service Tax regime with applicable taxes. After implementation of GST, the Respondent raised demand of the balance amount (37.50% of the total cost of the flat) with applicable GST.
9. The Respondent further submitted that he was not directly engaged in the construction activity and all the work related to the project was assigned to various sub-contractors, who procured all the required materials on their own except Steel, Cement and RMC which were supplied by the Respondent on free of charge basis. However, the project was executed under the supervision of the staff employed by the Respondent.
10. The Respondent also informed the DGAP that in the pre-GST regime, under the provisions of Haryana Value Added Tax Act, 2003, “Under-Construction Properties” were covered under the definition of `Works Contract’ and subjected to Haryana VAT @ 4.5% (approximately) with full ITC of VAT paid on the goods involved in the execution of works contracts. He also clarified that under the Service Tax regime, “Construction Services” were subjected to Service Tax @4.5% but the Affordable Housing was exempted from Service Tax, vide Notification No. 9/2016-ST dated 01.03.2016 with effect from 01.03.2016. He then submitted that in the GST regime, construction of low cost houses upto a carpet area of 60 square meters per house in a housing project approved by any State Government, was taxable @ 12% (effectively @ 8% after 1/3rd abatement for the value of land), vide Notification No. 01/2018-Central Tax (Rate) dated 25.01.2018 (earlier the rate of tax on affordable housing was 18% and the effective rate was 12% after 1/3rd abatement for land value). Therefore, the total indirect tax burden on the project was increased by 3.5% after the introduction of GST.
11. The Respondent further mentioned that under the erstwhile VAT/Service Tax regime, the Respondent was allowed input tax credit in respect of all VAT/WCT paid to the vendors/sub-contractors and that the affordable housing sale price of Rs. 4,000/- per sq. ft. was fixed after considering the benefit of input tax credit of VAT/WCT. However, the Central taxes, i.e., Central Excise Duty and Service Tax levied on the goods and services used in the execution of works contract were part of the cost of the project. Now, under the GST regime, the benefit of erstwhile Central Excise Duty/Service Tax was available to the Respondent and the same was required to be passed on to the recipients.
12. The Respondent further submitted that Section 171 of the CGST Act, 2017 provided that it was mandatory to pass on any benefit due to reduction in rate of tax or input tax credit, to the recipients, by way of commensurate reduction in prices. The said statute could be invoked in the following two situations:‑
a) If there was reduction in the rate of tax on supply of goods or services.
b) If benefit of additional input tax credit was available.
Upon perusal of the facts of this case, it could be summarised that in the GST regime, there was no reduction in the rate of tax on supply of goods and services as compared to the pre-GST regime. Instead, there was increase in the rate of GST by approximately 3.5%. Hence this was a case where only the benefit of ITC, if any, was relevant for the purposes of determination of profiteering.
