Yogesh Sharma Vs Total Environment Habitat Pvt. Ltd. (NAA)
The Authority finds that, the ITC, as a percentage of the turnover, that was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 1.02%, whereas, during the post-GST period (July-2017 to April, 2020), it was 1.84%. This confirms that in the post-GST period, the Respondent has been benefited from additional ITC to the tune of 0.82% (1.84%-1.02%) of his turnover and the same is required to be passed on by him to the recipients of supply, including the Applicant No. 1. The Authority finds that the computation of the amount of ITC benefit to be passed on by the Respondent to the eligible recipients works out to Rs.3,87,94,493/-. The DGAP has calculated the amount of ITC benefit to be passed on to all the eligible recipients as Rs.3,87,94,493/- on the basis of the information supplied by the Respondent and hence the profiteered amount computed by the DGAP is hereby accepted as correct.
In view of the discussions above, the Authority finds that the Respondent has profiteered by an amount of Rs.3,87,94.493/-during the period of investigation i.e. 01.07.2017 to 30.04.2020 and determined the said amount under Rule 133(1) of the CGST Rules, 2017, the benefit of which has not been passed on to the recipients.
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 detailed above.
We order that, the said amount of Rs.3,87,94,493/- (including 12% GST) that has been profiteered by the Respondent from his home buyers, including Applicant No. 1, shall be refunded by him, 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 GCST Rules 2017 within a period of three months of from the date receipt of this order. The amounts to be refunded to each individual homebuyer is as per Annexure ‘A’ to this Order. Such amount shall be amount shall be refunded with appropriate interest @18% as ordered above.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 27.11.2020 has been received from 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 brief facts of the case are that 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 “Pursuit of a Radical Rhapsody” 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 DGAP has further reported that the Karnataka State Screening Committee on Anti-profiteering examined the said Application and observed that the Respondent had not passed on the appropriate benefit of ITC to the Applicant No. 1 as the additional ITC available to Respondent should have been apportioned against the installments towards the price of the flat. The Karnataka State Screening Committee forwarded the said Application with its recommendation, to the Standing Committee on Anti-profiteering for further action, in terms of Rule 128 of the Rules.
3. The DGAP has further stated that the aforesaid reference was examined by the Standing Committee on Anti-profiteering, in its meeting held on 20.03.2020, the minutes of which were received in the DGAP’s office on 06.05.2020, whereby it was decided to forward the same to this Authority, to conduct a detailed investigation in the matter.
4. The DGAP has also stated that the Applicant No. 1 had submitted the following documents along with his Application:
a. Copy of demand letters issued to him, both pre-GST and post-GST.
b. Duly filled APAF form.
5. The DGAP has further submitted that the Applicant No. 1 had booked Flat No. 1114 in the Respondent’s project “Pursuit of a Radical Rhapsody”, for which Agreement for Sale, Construction Agreement & Customization Supplementary Agreement executed on 13.06.2016, in the pre-GST era.
6. The DGAP has also submitted that on receipt of the said reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129 of the Rules was issued by DGAP on 04.06.2020, calling upon 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 supporting documents. Vide the said Notice, the Respondent was given an opportunity to inspect the non-confidential evidences/information submitted by the Applicant No. 1 during the period 19.06.2020 to 22.06.2020, which the Respondent couldn’t avail of. However, the Respondent requested for copy of the complaint and details of description of the goods or services in respect of which the proceedings had been initiated and summary of the statement of facts on which allegations were based vide email dated 23.06.2020, and the same was provided accordingly.
7. The DGAP has further reported that the Applicant No. 1 vide his letter dated 25.06.2020, received in the DGAP on 13.07.2020 submitted that he wanted to voluntarily withdraw his complaint against the Respondent and requested to drop the complaint citing that there was some confusion at his end regarding benefit of ITC, which had since been clarified to his utmost satisfaction now. The Applicant No. 1 stated that earlier he was under impression that benefit of ITC should be paid by way of cash refund, however, now it had been clarified by the Respondent that the benefits were going to be adjusted fully against his future milestones dues payable to the Respondent which fell before handing over the apartment. In this regard, although the Applicant No. 1 had withdrawn the complaint, it was clear that the additional benefit of ITC had not been passed on to the Applicant No. 1at the time of raise of demands post-GST implementation. Further, the Respondent had been availing additional benefit of ITC and using the same to discharge his GST liabilities against the demands raised or advances received since GST implementation, while collecting GST from the home-buyers without extending any benefit to the home-buyers all this while. Accordingly, irrespective of the request of the Applicant No. 1, the investigation was not dropped and vide e-mail dated 23.12.2020, the Applicant No. 1was given an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on or before 29.12.2020, which the Applicant No. 1 did not avail of.
8. The DGAP has stated that the period covered by the current investigation was from 01.07.2017 to 30.04.2020.
9. The DGAP has further reported that as the reference was received in the DGAP’s Office on 06.05.2020, the time limit to complete the investigation was up to 05.11.2020, unless extended by a further period of 3 months as per Rule 129(6) of the Rules by this Authority. However, in light of Covid-19 pandemic, the investigation could not be completed on or before the above dates due to force majeure. Accordingly, this Report was being furnished in terms of the Notification No. 91/2020-Central Tax dated 14.12.2020, issued by the CBIC under Section 168A of the Act wherein the last date for computation of such cases had been extended up to 31.03.2021.
10. The DGAP has also reported that in response to the Notice dated 04.06.2020, the Respondent submitted his reply vide letters/e-mails dated 23.06.2020, 14.07.2020, 06.08.2020, 03.09.2020, 12.09.2020, 16.10.2020, 29.10.2020, 02.11.2020, 16.11 2020, 01.12.2020, 08.12.2020, 09.12.2020, 10.12.2020, 16.12.2020, 18.12.2020, 21.12.2020, 22.12.2020, 23.12 2020, 24.12.2020, 28.12.2020 and 29.12.2020.
11. The DGAP has further stated that vide aforementioned letters/e-mails, the Respondent submitted the following documents/information:
(a) Copies of GSTR-1 Returns for the period July, 2017 to April, 2020.
(b) Copies of GSTR-3B Returns for the period July, 2017 to April, 2020.
(c) Copy of Electronic Credit Ledger for the period 01.07.2017 to 30.04.2020.
(d) Copies of Tran-1 for the period July, 2017 to December, 2017.
(e) Copies of VAT & ST-3 Returns for the period April, 2016 to June, 2017.
(f) Copies of all demand letters, sale agreement/contract issued in the name of the Applicant No. 1.
(g) CENVAT/ITC register for the period April, 2016 to April, 2020.
(h) Copy of Balance Sheet for FY 2016-17 & 2017-18.
(i) Tax rates, pre-GST and post-GST.
(j) Details of turnover, output tax liability/GST payable and ITC availed and his reconciliation with the turnover as per the list of home-buyers.
(k) List of home buyers in the project “Pursuit of a Radical Rhapsody” for both phase I & II.
12. The DGAP has also stated that the Respondent vide his submission dated 28.12.2020 had submitted that the information shared, documents and data submitted was confidential in nature and was to be treated as Confidential in terms of Rule 130 of the Rules.
13. The DGAP has further reported that the subject Application, various replies of the Respondent and the documents/evidences on record had been carefully examined. The main issues for determination was 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 and if so, whether the Respondent passed on such benefit to the recipients, in terms of Section 171 of the CGST Act, 2017.
14. The DGAP has also reported that 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 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 his first occupation, whichever was earlier”. Thus, the ITC pertaining to the residential units which was 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 exempted supply under sub-section (2) shall be such as maybe 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, ITC pertaining to the unsold units was outside the scope 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 additional ITC available to him post-GST.
15. The DGAP has further submitted that in response to the Notice of Initiation of investigation dated 13.05.2019, subsequent reminders and summons, the Respondent vide his submission dated 29.12.2020 stated:-
a. That the Project was in 3 phases. Phase-1 commenced on Dt.14.10.2017. Phase 2 was commenced on Dt. 02.01.2019. Phase 3 was commenced on Dt. 17.08.2020.
b. That separate accounts were maintained for each phase of the project “Pursuit of a Radical Rhapsody” as mandated under erstwhile CENVAT Credit Rules 2004, present CGST Rules 2017 & RERA regulations.
c. That besides phase 1, other phases of the project were launched post GST regime, where availability of additional ITC was known and accordingly final prices with customers were Case. agreed upon. Home buyers in the 1st phase were informed that benefits of ITC accruing to the Respondent should be passed on to them at the end of project as actual quantum of benefit should be known at that point only.
d. That in his case, he had planned to develop several towers spread across different phases, and he was in the process of developing many towers at present, each of these different towers were initiated at a different point of time, that the progress of each tower was at a different stage.
e. That in terms of the provisions of the RERA Act, promoters were legally bound to register his on-going as well as new projects, and maintain separate accounts for each of the projects. In compliance, he had obtained RERA registration for each of the on-going projects as well as for other phases planned and hence each phase should be considered as a separate project.
f. The Respondent vide his submissions dated 29.12.2020, provided the RERA certificate for each of the separate phases, vide his submissions dated 24.12.2020, provided details of credit availed during pre & post GST regime for Phase -I.
g. That he maintained separate accounts for each of these phases. From RERA certificate and separate books of accounts for CENVAT/ITC maintained by the Respondent it was claimed by him that each project was different from another and Phase-II and Phase-III were launched post-GST. Credit of one project might not be clubbed with other project else it should jeopardize the interest of the home-buyers of one project at the cost of benefit to the other.
