Jigar R. Shah Vs Jay Ambe Developers (National Anti-Profiteering Authority)
It is clear from the plain reading of Section 171(1) that, it deals with two situations:- one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP’s Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. It is admitted fact that project was started in pre-GST period and several bookings/payments were made in the pre-GST period. The DGAP’s Report reveals that CENVAT, as a percentage of the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 0.00%, whereas, during the post-GST period (July-2017 to March-2019), it was 1.85%. This confirms that in the post-GST period, the Respondent has c\ been benefited from additional ITC to the tune of 1.85% [1.85% – 0.00%] of his turnover and the same was required to be passed on by him to the eligible flat buyers, including the Applicant No. 1. We observe that the computation of the amount of ITC benefit to be passed on by the Respondent to the eligible flat buyers works out to Rs. 4,31,473/- on the basis of the information supplied by the Respondent. The said amount has been accepted by the Respondent in the personal hearing held on 31.03.2022 and he has agreed to pass on the said amount to the buyers. Hence the said amount of profiteering computed by the DGAP is hereby accepted as correct. The said profiteered amount is to be passed on to the said home buyers along with interest @ 18% thereon, from the date when the above amount was profiteered by him till the date of such payment, in accordance with the provisions of Rule 133 (3) (b) of the CGST Rules, 2017.
This Authority agrees with and accepts the above-detailed computation of profiteered amount as per the Report of the DGAP and hence, the profiteered amount for the period from 01.07.2017 to 31.03.2019, in the instant case, is determined as Rs. 4,31,473/-under Section 171 of the CGST Act, 2017. 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 home buyers commensurate with the benefit of ITC received by him as has been detailed above.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. Present Report dated 25.03.2021 had been furnished by the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP) after a detailed investigation, under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The Applicant No. 1 had filed an application under Rule 128 (1) of the CGST Rules, 2017 against the Respondent alleging profiteering in respect of construction service supplied by him. The Applicant No. 1 had stated that he had purchased a flat in the Respondent’s project “Venice Bungalows” and had alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the prices.
2. The aforesaid Application was examined by the Gujarat State Screening Committee and referred to the Standing Committee on Anti-profiteering. The said application was then examined by the Standing Committee on Anti-profiteering, in its meeting, the minutes of which were received in the DGAP’s office on 15.10.2020, forwarding the same to the DGAP to conduct a detailed investigation. Accordingly, investigation was initiated to collect evidence necessary to determine whether the benefit of Input Tax Credit had been passed on by the Respondent to his customers in respect of Construction Service supplied by him.
3. In the report dated 25.03.2021, it was inter-alia, stated by the DGAP that:-
(i) A Notice under Rule 129 of the Rules was issued on 09.11.2020, calling upon the Respondent to reply as to whether he admitted that the benefit of ITC had not been passed on to his customers by way of commensurate reduction in prices 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 said Notice, the Respondent was also given an opportunity to inspect the non-confidential evidences/information furnished by the Applicant No. 1 during the period 30.11.2020 to 01.12.2020. However, the Respondent did not avail of this opportunity.
(ii) The period covered by the current investigation was from 01.07.2017 to 30.09 2020.
(iii) In response to Notice dated 09.11.2020, the Respondent submitted his reply vide letters and e-mails dated 05.01.2021, 01.02.2021, 08.03.2021 and 10.03.2021.The submissions of the Respondent inter alio, has been summed up as follows:
a. The Booking, Payment and Sale Deed were executed/made betweep the Applicant No. 1 and the Respondent in post-GST regime period only. There should be no question of Anti-profiteering or passing any benefit to the Applicant No 1. The sale price negotiated and decided between the Applicant No. 1 and the Respondent was based on the market rate from time to time after considering the input credit, if any available to the Respondent.
b. The Respondent had not taken any input credit for input service/Cenvat for input Goods during the pre-GST period and paid entire Service Tax to the Government on receipt of Advance from various buyers inspite of the fact that the Service Tax paid on Input Services was available as Input Credit.
c. After opting for New Scheme of payment of tax/GST @ 5% without any ITC, they had utilized ITC of Rs. 6,07,810/- by mistake. To rectify the above, the Respondent had filed DRC-03 subsequently and paid back the entire input credit mistakenly utilized while filing various GSTR-3B Return. The copy of the DRC-03 filed on 23.06.2020 for reversal of ITC Rs. 6,07,810/- (Rs.3,03,905/-SGST and Rs. 3.03,905/- CGST) was submitted.
d. Effective from 01.04.2019. he had opted to pay GST at new applicable rate i.e. 5% without ITC, and accordingly the Respondent had stopped claiming ITC effective from 01.04.2019 onwards.
(iv) The DGAP has further reported that the Respondent submitted the following documents/information:-
a. Brief Profile of the Respondent.
b. Copies of GSTR-1 Returns for the period July, 2017 to September, 2020.
c. Copies of GSTR-3B Returns for the period July, 2017 to September, 2020.
d. Electronic Credit Ledger for the period July, 2017 to September, 2020.
e Copies of VAT Returns &ST-3 Returns for the period April, 2016 to June, 2017.
f. Details of VAT, Service Tax. ITC of VAT, Cenvat Credit for the period April, 2016 to June,2017 and output GST and ITC of GST for the period July, 2017 to September,2020.
g. Details of applicable tax rates, Pre-GST & Post-GST.
h. Sale agreement issued to the Applicant No. 1.
i. Balance Sheet for the FY 2016-17,2017-18,2018-19 & 2019-20.
j. Status of the project “Venice Bungalows” as on 30.09.2020 in terms of tower-wise sold and unsold units along with copies of Occupancy Certificates.
k. Project Report submitted to the RERA.
l. Cenvat/ITC Register for the FY 2016-17, 2017-18, & 2018-19.
m. List of home buyers in the project “Venice Bungalows”.
n. The copy of the DRC-03 filed on 23.06.2020 for reversal of ITC Rs. 303905/-SGST.
(v) Vide Notice dated 09 11 2020, the Respondent was informed that if any information/documents were provided on confidential basis, in terms of Rule 130 of the Rules, a non-confidential summary of such information/documents was required to be furnished. However, the Respondent did not submit any such information or summary.
(vi) Vide e-mail dated 15.03.2021, the Applicant No. 1 was afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on 16.03.2021 or 17.03.2021. The Applicant No. 1 vide e-mail dated 15.03.2021 requested he was unable to visit due to Covid pandemic and requested to forward the documents at any branch of DGAP’s office at Vadodara, Gujarat.
4 The DGAP in it’s Report dated 25.03.2021 has further stated that:-
(i) The subject Application, various replies of the Respondent/Applicant No. 1 and the documents/evidences on record had been carefully examined. The main issues for determination were: –
a. Whether there was benefit of reduction in rate of tax or ITC on the supply of Construction Service by the Respondent after implementation of GST w.e.f. 01.07.2017 and if so,
b. Whether the Respondent had passed on such benefit to the recipients by way of commensurate reduction in prices, in terms of Section 171 of the CGST Act, 2017.
(ii) According to 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) 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 CGST 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 might 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”.
Therefore, the ITC pertaining to the unsold units might not fall within the ambit Of this investigation and the Respondent was required to recalibrate the selling price of such units to be sold to the prospective buyers by considering the proportionate benefit of additional ITC available to them post-GST.
(iii) The contention of the Respondent that Section 171 of the CGST Act, 2017 could not be invoked in respect of the Applicant No. 1 as the flat was purchased after the introduction of GST was incorrect. The additional amount of benefit accrued to a supplier on account of reduction in rate of tax or benefit of ITC could not be denied to a recipient on the grounds that he had purchased the flat after the introduction of GST as these benefits had arisen due to the policy of the State/Government.
(iv) The contention of the Respondent that he had reversed the unutilized credit of Rs. 6,07,810/- subsequently i.e. after 01.04.2019 had no bearing on the fact that such credit was available to him upto 31.03.2019 and the homebuyers were eligible to get the benefit of additional ITC.
(v) Prior to 01.07.2017, i.e., before the GST was introduced, the Respondent was eligible to avail credit of Service Tax paid on the input services but the Respondent had not availed any credit of Service Tax (CENVAT credit of Central Excise duty was not available) in respect of the units for the project “Venice Bungalows” sold by him. Moreover, the Respondent had neither claimed nor was eligible for any credit of VAT paid on inputs. Further, post-GST, the Respondent could avail ITC of GST paid on all the inputs and input services. From the data submitted by the Respondent covering the period April, 2016 to March, 2019, the details of the ITCNAT availed by him, his turnover from the project “Venice Bungalows”, the ratios of ITC to turnovers, during the pre-GST (April, 2016 to June, 2017) and post-GST (July, 2017 to March, 2019) periods, have been furnished in table-A below:-
Table-A
