Hussain Shoaib Kothalia Vs Dra Aadithya Projects Pvt. Ltd. (NAA)
1. The present Report dated 26.03.2020 has been received from the Applicant No. 3 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 DGAP had received a reference from the Standing Committee on Anti- profiteering on 28.06.2019 to conduct a detailed investigation in respect of an application filed under Rule 128 of the Central Goods and Services Tax Rules, 2017 by the Applicant No. 1 alleging profiteering by the Respondent in respect of purchase of a flat in the Respondent’s project “Pristine Pavilion Phase-III”. The Applicant No. 1 had alleged that the Respondent had not passed on the benefit of input tax credit (ITC) to him by way of commensurate reduction in prices and charged GST @12% on the amount due to him against payments.
2. Further, the Applicant No. 2 had also filed an application before the Standing Committee on Anti-Profiteering which was examined by the Standing Committee on Anti-Profiteering in its meeting held on 13.09.2019 and forwarded to the DGAP for detailed investigation in the matter.
3. The DGAP, on receipt of the aforesaid references from the Standing Committee on Anti-profiteering, issued a Notice dated 12.07.2019 under Rule 129 (3) of the CGST Rules, 2017, 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 recipients 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 to furnish all documents in support of his reply. Further, the DGAP gave an opportunity to the Respondent to inspect the non-confidential evidence/information which formed the basis of the above said Notice, during the period from 18.07.2019 to 22.07.2019. However, the Respondent did not avail of the said opportunity. Vide email dated 23.03.2020, the Applicant No. 1 and 2 were also given an opportunity to inspect the non-confidential documents/reply furnished by the Respondent. However, the Applicant No. 1 vide his e-mail dated 23.03.2020 stated that “due to the outbreak of Corona Virus and country wide lockdown, I will not be able to visit the office at Delhi as I stay in Chennai to inspect the Non-confidential information submitt by M/s DRA.”
4. The DGAP has covered the period from 01.07.2017 to 30.06.2019 during the current investigation. The time limit to complete the investigation was extended up to 31.03.2020 by this Authority vide its order dated 12.12.2019, in terms of Rule 129 (6) of the Rules.
5. The DGAP has stated that the Respondent had replied vide various letters/ e-mails dated 22.07.2019, 26.07.2019, 06.08.2019, 14.08.2019, 12.12.2019, 16.12.2019, 18.02.2020, 21.02.2020 and 18.03.2020 in response to the above said Notice. The Respondent had submitted the following documents/ information before the DGAP:-
(a) Copies of GSTR-1 Returns for the period from July, 2017 to June, 2019.
(b) Copies of GSTR-3B Returns for the period from July, 2017 to June, 2019.
(c) Tran-1 and Tran-2 Statements for the period from July, 2017 to December, 2017.
(d) Electronic Credit Ledger for the period from July, 2017 to June, 2019.
(e) Copies of VAT Returns (including all Annexures) & ST-3 Returns for the period from April, 2016 to June, 2017.
(f) Copies of Balance Sheets for FY 2016-17, 2017-18 & 2018-19.
(g) Details of VAT, Service Tax, ITC of VAT, CENVAT credit for the period from April, 2016 to June,2017 and output GST and ITC of GST for the period from July, 2017 to September, 2019 for all the projects including the “Pristine Pavilion Phase-III”.
(h) CENVAT/Input Tax Credit Register for the FY 2016-17, 201718, 2018-19 and for the period from April, 2019 to September, 2019 reconciled with VAT, ST-3 and GSTR-3B Return along with details of credit reversals.
(i) Details of applicable tax rates, Pre-GST and Post-GST.
(j) List of home buyers in the project “Pristine Pavilion Phase-III” along with details of benefit passed on,
(k) Copy of Project Report submitted to the RERA.
6. The DGAP has stated that he has scrutinized the references received from the Standing Committee on Anti- profiteering, various replies of the Respondent and the documents/evidences on record and the following issues were to be investigated by him:-
a) Whether there was benefit of reduction in the rate of tax or input tax credit on the supply of construction service by the Respondent, on implementation of GST w.e.f. 01.07.2017 and if so,
b) Whether such benefit was passed on by the Respondent to the recipients, in terms of Section 171 of the Central Goods and Services Tax Act, 2017.
7. The DGAP has further stated that the Para 5 of Schedule-III of the Central Goods and Services Tax Act, 2017 (Activities or Transactions which reads as “Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building”. Further, clause (b) of Paragraph 5 of Schedule II of the Central Goods and Services Tax Act, 2017 reads a “(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 has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier”. Thus, the input tax credit pertaining to the residential units and commercial shops which were under construction but not sold was provisional input tax credit which might be required to be reversed by the Respondent if such units remained unsold at the time of issue of the Completion Certificate (CC), in terms of Section 17 (2) & Section 17 (3) of the Central Goods and Services Tax Act, 2017, which read as under:
Section 17 (2) “Where the goods or services or both are 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 exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero- rated supplies”.
Section 17 (3) “The value of exempt supply under sub-section (2) shall be such as may be prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building”.
Therefore, the DGAP has stated that the ITC pertaining to the unsold units was outside the scope of this investigation and the Respondent was required to recalibrate the selling prices of such units to be sold to the prospective buyers by considering the net benefit of additional input tax credit available to him post-GST.
8. The DGAP has observed 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 input services only (no credit was available in respect of Central Excise Duty paid on the inputs) and also input tax credit of VAT paid on inputs was not available to the Respondent. Further, post-GST, the Respondent could avail input tax credit of GST paid on all the inputs and the input services including the sub-contracts. From the information submitted by the Respondent for the period from April, 2016 to June, 2019, the details of the input tax credit availed by him, his turnover from the current project “Pristine Pavilion Phase-III”, the ratio of input tax credit to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to June, 2019) periods, was furnished in Table- ‘A’ given below by the DGAP:-
Table- A
Amount in Rs.)
