Rahul Gautam Vs Himalaya Real Estate Pvt. Ltd. (NAA)
Facts of the Case:
The brief facts of the case are that the Applicant No. 1 had filed an application dated 16.10.2018 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 purchased a flat in the Respondent’s project “Himalaya Pride” situated at Plot No. 10-B, Techzone-IV, Greater Noida (West), UP-201306 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 (1) of the Central Goods and Services Tax Act, 2017. The Haryana State Screening Committee on Anti-profiteering on prima facie having satisfied itself that the Respondent had not passed on the benefit of ITC, had 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.
Held by NAA:
The Respondent further claimed that he had passed on the benefit of Input credit of GST of Rs. 2,94,078/- (Rs. 4,70,496 (GST was higher than the amount of Rs. 2,73,653/- computed by the DGAP and accepted by the Applicant No. 1. He also contended that an amount of Rs. 3,41,963/- was given as the discount in addition to reduction in GST rate of 7,5% to the Applicant No. 1. However, upon perusal of the annexure 1 of the Respondent’s submissions dated 20.08.2019, it is revealed that he himself had computed an amount of Rs. 3,44,131/- as the ITC/Discount as per demand letter/contract for the Applicant No. 1. Further, from the perusal of the Applicant No. 1’s submissions dated 20.08.2019, it is observed from the receipts that an amount of Rs. 2,36,130/- has been passed on as ITC rebate (SGST and CGST) by the Respondent which contradicts his claim of Rs. 3,41,9631- as the discount in addition to reduction in GST rate of 7.5% was given to the Applicant No. 1. However, the possibility of passing on some ITC benefit to the Applicant No. 1 can not be completely ruled out and the same needs to be verified. Thus, NAA find it imperative that the mathematical calculations of profiteering are reinvestigated by the DGAP. Based upon the above facts, the present Report filed by the DGAP cannot be accepted and hence the case is remanded to him for further investigation as per the provisions of Rule 133(4).
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 01,07.2019 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 16.10.2018 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 purchased a flat in the Respondent’s project “Himalaya Pride” situated at Plot No. 10-B, Techzone-IV, Greater Noida (West), UP-201306 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 (1) of the Central Goods and Services Tax Act, 2017. The Haryana State Screening Committee on Anti-profiteering on prima facie having satisfied itself that the Respondent had not passed on the benefit of ITC, had 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 above reference was examined by the Standing Committee on Anti-profiteering and vide its minutes of the meeting dated 13.12.2018 it had forwarded the same to the DGAP for detailed investigation.
3. The DGAP on receipt of the application issued two letters to the Standing Committee on Anti-profiteering on 12.09.2018 and 17.10.2018 and sought the supporting documents along with details of the Applicant No. 1. The Standing Committee of 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. Further, the Applicant No. 1 had submitted Cost Sheet, Booking Form, Receipt of amounts paid, Copy of allotment letter along with his application.
5. The DGAP on receipt of the application issued notice dated 18.01.2019 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 there of and indicate the same in his reply to the notice as well as furnish all the supporting documents. The Respondent was also given an opportunity to inspect the non-confidential evidences/information submitted by the above Applicant. ‘However, the Respondent did not avail this opportunity. The DGAP, vide email dated 04.06.2019, 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.
6. The DGAP had sought extension of time for completing the investigation which was extended by this Authority vide its order dated 19.03.2019 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. In response to the DGAP’s Notice dated 18.01.2019, reminders dated 28.01.2019, 01.02.2019 and 13.02.2019, followed by Summons dated 12.03.2019, issued to Shri Vishal Sharma, Director of the Respondent to appear on 19.03.2019, the Respondent submitted his replies vide letters/e-mails dated 14.02.2019, 19.03.2019, 20.05.2019, 28.05.2019, 10.06.2019, 20.06.2019 and 25.06.2019.
8. The Respondent had also furnished the following documents to the DGAP:-
(a) Copies of GSTR-1 Returns for the period July, 2017 to December, 2018.
(b) Copies of GSTR-3B Returns for the period July, 2017 to December, 2018.
(c) Copy of TRAN-1.
(d) Copies of VAT & ST-3 Returns for the period April, 2016 to June, 2017.
(e) Copies of all demand letters, sale agreement/contract issued to the Applicant No. 1.
(f) Copy of Balance Sheet for FY 2016-17 & 2017-18.
(g) Copy of Electronic Credit Ledger for the period 01.07.2017 to 31.12.2018.
(h) CENVAT/Input Tax Credit register for the period April, 2016 to December, 2018.
(i) Copy of Project report submitted to the RERA.
(j) List of home buyers in the project “Himalaya Pride”.
9. The Respondent, vide his letter dated 14.02.2019 submitted that he had been passing on the benefit of ITC to his customers including the Applicant No 1. He also submitted a copy of the allotment letter dated 26.09.2018, issued in favour of the Applicant No. 1, executed on a non-judicial stamp paper, wherein it was explicitly mentioned that the Applicant No. 1 had to pay only the basic consideration for the flat which was Rs. 40,96,800/- and the applicable GST would be borne by the Respondent. The Respondent did not claim confidentiality of any details/ information furnished by him, in terms of Rule 130 of the CGST Rules, 2017.
10. The DGAP stated that the main issues to be examined were as under:-
(a) Whether there was reduction in rate of tax or benefit of ITC on the supply of construction service by the Respondent after implementation of GST w.e.f. 01.07.2017.
(b) If so, whether the Respondent had passed on such benefit to the recipients, in terms of Section 171 of the CGST Act, 2017.
11. The DGAP also submitted that the para 5 of Schedule-III of the CGST Act, 2017 (Activities or Transactions which shall be treated neither as a supply of goods nor a supply of services) 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 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 has been received after issuance of completion certificate, where required, by the competent Authority or after its first occupation, whichever is earlier”. Thus, the ITC pertaining to the residential units which were under construction but not sold was provisional ITC which may be required to be reversed by the Respondent, if such units remained 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 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”.
12. Thus the DGAP claimed that the ITC pertaining to the unsold units may not fall within the ambit of the current investigation and the Respondent would be required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the net benefit of additional input tax credit available to them post-GST.
13. The DGAP further stated that though the Respondent had mentioned that he had passed on the benefit of ITC to the home-buyers, he failed to provide any documentary evidence of such discounts offered to the individual home-buyers except the allotment letter dated 26.09.2018 issued to the Applicant No. 1, wherein it was mentioned that all GST liability would be borne by the Respondent as discount and the Applicant No. 1 would have to pay only the basic consideration of Rs. 40,96,800/-.
14. The DGAP further observed that prior to 01.07.2017, i.e., before GST was introduced, the Respondent was eligible to avail CENVAT credit of Service Tax paid on the input services. However, CENVAT credit of Central Excise duty paid on the inputs was not admissible as per the CENVAT Credit Rules, 2004, which were in force at the material time. The Respondent had submitted that he was neither availing any ITC of VAT, nor was he charging VAT from his customers, as would be evident from the demand letters. However, he was discharging his output VAT liability on deemed 20% value addition to the purchase value of the inputs. Hence, there was no direct relation between the turnover reported in the Respondent’s VAT ‘returns for the period April, 2016 to June, 2017 and the actual consideration received from the home buyers. Therefore, the ITC of VAT and the VAT turnover had not been considered for computation of the ratio of ITC to the turnover for the pre-GST period. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and the input services. From the information submitted by the Respondent for the period April, 2016 to December, 2018, the DGAP has furnished the details of the input tax credit availed by him, his turnover from the present project and the ratio of ITC to turnover, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to December, 2018) in the table given below:-
Table ‘A’
