Shri Dharmendra Gaud Vs JMK Holdings Pvt. Ltd. (National Anti-Profiteering Authority)
We have carefully considered all the Reports filed by the DGAP, submissions of the Respondent and other material placed on record and it is revealed that the Respondent is executing his ”Grand IV A” project under the Affordable Housing Scheme approved by the Government of Haryana under the Prime Minister Awas Yojana and is constructing both residential and commercial accommodation. It is – also revealed that the Applicant No. 1 had complained to the Haryana State Screening Committee on Anti-profiteering on 10.04.2018 that the above Respondent was not passing on the benefit of ITC to him on the flat which he has purchased from him and was also charging GST from him on the pre-GST base price of Rs. 4,000/- per sq. ft. The above Committee had examined the complaint in its meeting held on 20.06.2018 and having satisfied itself that there was prima facie evidence to believe that the Respondent had not passed on the benefit of ITC to the above Applicant had forwarded his application to the Standing Committee on Anti-Profiteering for further action as per the provisions of Section 128 (2) of the above Rules. The above complaint was examined by the Standing Committee in its meetings held on 07.08.2018 & 08.08.2018 and was forwarded to the DGAP for detailed investigation as per the provisions of Rule 129 (1) of the CGST Rules, 2017. The DGAP has conducted investigation in the above allegations levelled by the Applicant No. 1 and vide his Report dated 25.04.2019 has stated that the Respondent had violated the provisions of Section 171 of the above Act by resorting to profiteering of an amount of Rs. 3,58,90,8711-.
Respondent had approached the above Applicant and won him over not to pursue the complaint as it would have made him liable for profiteering under Section 171 (1) of the above Act. It is also clear that the above Applicant had not mentioned in his above letter that he has received the benefit of ITC which was his main allegation against the Respondent. Therefore, the above withdrawal cannot be taken to be bonafide and genuine There is also no provisions in the CGST Act or the Rules for withdrawal of the complaint as there is possibility of coercion or undue influence on the Complaints by the unscrupulous builders. The DGAP is also bound to launch investigation on a complaint once he has received recommendation from the Standing Committee on Anti-Profiteering under Rule 129 (1) and he cannot stop such investigation on the withdrawal of the complaint once it discloses commission of an offence under Section 171 of the above Act. Since, the benefit of ITC has been given by the Central and the State Government out of the public exchequer in favour of the buyers it is also incumbent on the DGAP to find out whether the above benefit has been passed on by the Respondent or it has been misappropriated by him. Therefore, the above contention of the Respondent is frivolous and hence, the same cannot be accepted.
We also observe that the benefits of tax rate reduction and ITC have been given by the State and the Central Govt. from their own tax revenue to provide accommodation to the vulnerable sections of society under the Affordable Housing Schemes. The method of interpretation of this provision has been given in the text of Section 171 of the CGST Act, 2017 itself. We also observe that the above provision clearly links profiteering with each supply of goods or services or both and hence, profiteering has to be computed at the level of both. Therefore, the Respondent is under legal obligation to pass on the benefit of ITC to his buyers and he cannot be allowed to appropriate the same.
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 4.76% and during the post-GST period from July, 2017 to December, 2018, it was 7.27% as per Table B supra and hence it is established that the Respondent has benefited from the benefit of additional ITC to the extent of 2.51% [7.27% (-) 4.76%] of the turnover. Since, the above computations shown in Table B have been made on the basis of the VAT, Service Tax and GST Returns filed by the Respondent as well as the information supplied by him therefore, the same can be taken to be correct and relied upon.
It is also clear from the record 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 profiteered amount 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 01.2018 to 31.12.2018, when the effective GST rate was 8%. Accordingly, the DGAP has calculated the profiteered amount or benefit to be passed on for the period from 01.07.2017 to 24.01.2018, – as Rs. 1,16,75,749/- for the residential flats and commercial shops, which includes 12% GST on the base profiteered amount of Rs. 1,04,24,775/-. 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. 2,42,15,122/- which includes 12% GST on commercial shops and 8% GST on residential flats, on the base profiteered amount of Rs. 2,23,88,036/-. 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. 3,58,90,871/- which includes GST @ 12% or 8% on the base profiteered amount of Rs. 3,28,12,811/- 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-22 of his Report. This amount is inclusive of Rs. 40,606/- including GST on the base amount of Rs. 37,598/- which is the benefit of ITC which is required to be passed on to the Applicant No. 1, mentioned at Serial No. 187 of Annexure-22. 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. 3,58,90,871/- as per the details mentioned in Annexure-22 above in terms 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 fiats commensurate with the benefit of ITC received by him as has been mentioned in detail in the preceding pares of this Order. As per the provisions of Rule 133 (3) (b) of the CGST Rules, 2017 it is further ordered that the Respondent shall refund the above profiteered amount to the buyers as per the details given by the DGAP in Annexure-22. The benefit of Rs. 40,606/- including GST on the base amount of Rs. 37,598/- will be required to be passed on to the Applicant No. 1. The above amount shall be passed on by the Respondent along with interest @18% PA 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 buyers as per their entitlement as per the provisions of CGST/SGST Acts.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 25.04.2019 and supplementary Report dated 26.06.2019 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 dated 10.04.2018 before the Haryana State Screening Committee on Anti-profiteering, under Rule 128 (2) of the Central Goods and Services Tax Rules, 2017 and submitted that he had purchase a flat in the Respondent’s project “Grand IV A” situated in Sector-103, Dwarka Expressway, Gurugram, Haryana 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 and had charged GST on the pre-GST base price of Rs. 4000 per sq. ft. The Haryana State Screening Committee on Anti-profiteering on prima facie having satisfied itself that there was less burden of tax in the GST regime due to availability of input tax credit which the Respondent should have passed to the buyers, had forwarded the above application with its recommendation to the Standing Committee on Anti-profiteering on 20.06.2018 for further action, in terms of Rule 128 (2) of the above Rules.
2. The above reference was examined by the Standing Committee on Anti-profiteering and vide minutes of its meetings dated 07.08.2018 and 08.08.2018, it had forwarded the same to the DGAP for detailed investigation under Rule 129 (1) of the above Rules.
3. The DGAP on receipt of the application issued two letters to the Standing Committee on Anti-profiteering on 12.09.2018 and 10.2018 and sought supporting documents along with details of the Applicant No. 1. The Standing Committee on Anti-profiteering, vide letter dated 04.10.2018 and e-mail dated 26.10.2018 provided the supporting documents and the details of the Applicant No. 1 to the DGAP. Therefore, the date of receipt of the application from the Standing Committee on Anti-profiteering, had been taken as 26.10.2018 by the DGAP.
4. The DGAP upon receiving the above mentioned details pertaining to the Applicant No. 1 issued Notice dated 29.10.2018 to the Respondent to reply as to whether he admitted that the benefit of ITC 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 the supporting documents. Further, the DGAP vide his letter dated 29.10.2018, had given an opportunity to the Respondent to inspect the non-confidential evidences/information submitted by the above Applicant. The Respondent availed the said opportunity and inspected the documents. The DGAP, vide e-mail dated 12.04.2019, had also given the Applicant No. 1 an opportunity to inspect the non-confidential evidences/information submitted by the above Respondent. However, the Applicant No. 1 did not avail of the said opportunity.
5. Vide letter dated 07.01.2019, the above Applicant informed the DGAP that all his doubts regarding pricing matters in the present project, stood clarified by the Respondent and that he was fully convinced that no undue advantage had been taken by the Respondent with regard to the flat booked by him under the Affordable Housing Scheme.
6. The DGAP had sought extension of time for completing the investigation which was extended by this Authority vide its order dated 01.2019 in terms of Rule 129 (6) of the CGST Rules, 2017. The period of the investigation is from 01.07.2017 to 31.12.2018.
7. The Respondent replied to the DGAP’s notice vide various letters but did not furnish the complete and the relevant documents. Hence, Summons under Section 70 of the CGST Act, 2017 read with Rule 132 of the CGST Rules, 2017 were issued by the DGAP on 06.12.2018 to the Respondent asking him to appear before his Superintendent on 14.12.2018 and produce the relevant documents. The Authorised Representative of the Respondent appeared before the Superintendent of the office of DGAP on 14.12.2018 and submitted the requisite documents.
8. In response to the Notice dated 29.10.2018 issued by the DGAP, the Respondent vide his replies dated 11.2018, 03.12.2018, 04.12.2018, 05.12.2018, 14.12.2018, 17.12.2018, 01.01.2019, 21.02.2019, 10.04.2019 and 12.04.2019 submitted that the Respondent was a single housing project construction company and was developing the present project in Sector-103, Gurugram under the Affordable Housing Scheme under the Pradhan Mantri Awas Yojna. He also submitted that he had already informed his customers that the benefit of reduction in the cost on account of tax benefit with the implementation of GST, would be duly passed on to them. He further submitted that his project was nearing completion and he was in the process of computing the final tax benefit which would be passed on to the customers in the next demand invoices to be raised in the month of May, 2019. The Applicant No. 1 had also been apprised of the above facts with the request for withdrawal of his complaint which had been made in haste.
9. He further stated that he was not directly engaged in any construction activity and all the work related to the project was assigned to various sub-contractors, who procured all the required raw 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 He also informed that in the pre-GST regime, “under-construction properties” were covered by the definition of works contract and attracted Haryana VAT @ 4.5% (approximately) with full input tax credit of VAT paid on goods involved in the execution of works contracts. Affordable housing was, however, exempt from Service Tax, vide Notification No. 9/2016-ST dated 01.03.2016. He further contended 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 GST rate on affordable housing was 18% and the effective rate was 12% after1/3rd abatement for the value of land). Thus, the total indirect tax burden on the project had increased by 3.5% after the introduction of GST. The Respondent also submitted that under the erstwhile VAT/Service Tax regime, the Respondent was allowed input tax credit of all VAT/WCT paid to the vendors/Sub-contractors. The affordable housing sale price of Rs. 4,0001- 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 & services used in the execution of works contract were part of the cost of the project. Now, under the GST regime, the benefit of the erstwhile Central Excise Duty/Service Tax was available to the Respondent and the same was required to be passed on to the recipients.
10. The Respondent further submitted that Section 171 of the CGST Act, 2017 provided that it was mandatory to pass on benefit due to reduction in rate of tax or input tax credit, to the consumer, by way of commensurate reduction in prices and the applicability of this statute would have arisen in the following two situations:-
a) If there was reduction in rate of tax on the supply of goods or services
b) If additional benefit of input tax credit was available.
He also stated that on perusal of the facts of the present 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 preGST regime, instead, there was an increase in the rate of GST by approximately 3.5%.
11. The Respondent also submitted that the Central taxes, i.e., Central Excise Duty/Service Tax levied under the pre-GST regime, on the transfer of property in goods in the execution of works contracts, were now available as input tax credit in the GST regime. The Respondent was only procuring Cement, Steel and RMC on his own and all other raw materials used in construction were sub-contracted to the various contractors, who procured raw materials directly, after due payment of Central Excise Duty/GST. However, the Respondent was negotiating with the sub-contractors for seeking the benefits under the GST regime and would pass on the same to his buyers, on or before the completion of the project.
12. The DGAP in his Report has also stated that the Respondent had furnished the following documents:-
(a) Copies of GSTR-1 Returns for the period from July, 2017 to December, 2018.
(b) Copies of GSTR-3B Returns for the period from July, 2017 to December, 2018.
(c) Copy of Tran-1 return for transitional credit.
(d) Copies of VAT & ST-3 Returns for the period from April, 2016 to‑ June, 2017.
(e) Copies of all demand letters and sale agreement/contract issued in the name of the Applicant.
(f) Details of applicable tax rates, pre-GST and post-GST.
(g) Copies of Balance Sheets (including all annexures and profit & loss account) for FY 2016-17& 2017-18.
(h) Copy of Electronic Credit Ledger for the period from 01.07.2017 to 31.12.2018.
(i) CENVAT Credit/Input Tax Credit register for the period from April, 2016 to December, 2018.
(j) Details of turnover, output tax liability, GST payable and input tax credit availed.
(k) List of home buyers and commercial shop buyers in the project “Grand IV A”, along with the details of commercial shop buyers.
(l) Reconciliation of turnover reported in the GSTR-3B Returns with that in the list of home buyers.
(m) Sample copies of letters issued to the customers regarding assurance to pass on the GST input tax credit benefit.
The Respondent had also requested to treat all the data/information furnished by him as confidential, in terms of Rule 130 of the CGST Rules, 2017.
13. Based on the above mentioned documents filed by the Respondent, the DGAP submitted that the main issues for determination were whether there was any benefit of reduction in rate of tax or input tax credit on the supply of construction service by the Respondent after implementation of the GST w.e.f. 01.07.2017 and if so, whether such benefit was passed on to the Applicant No. 1, in terms of Section 171 of the CGST Act, 2017.
14. The DGAP further submitted that the Respondent, vide his letter dated 04.12.2018, has submitted a copy of application dated 13.12.2017, demand letters and payment receipts for the sale of Flat No. 12-101 to the above Applicant, measuring 419.25 sq. ft., at the basic sale price of Rs. 4,000/- per sq. ft. and 69.84 sq. ft. of Balcony area at the basic sale price of Rs. 500/- per sq. ft. The DGAP has furnished the details of amounts and the GST paid by the Applicant No. 1 to the Respondent in Table-A below:-
Table-A
(Amount in Rs.)
