Sh. Priyanshu Pathak Vs Forever Buildtech Pvt. Ltd. (NAA)
The Authority finds that all the events i.e. the Licences, RERA Certificate, booking, the draw, allotment of flats, BBA, construction activity and receipt of payments has taken place in the post-GST era. It is also clear that the Applicant No. 1 was allotted flat only after coming in to force of the GST w.e.f. 01.07.2017 as the first tax invoice for demand cum allotment to him was raised on 29.07.2019, hence apparently there was no pre-GST tax rate or input tax credit availability that could be compared with the post-GST tax rate and the input tax credit, to determine whether there was any benefit that was required to be passed on by way of reduced price.
From the above facts, the Authority finds that, it is established that there had been no additional benefit of ITC to the Respondent and hence he was not required to pass on the benefit to the Applicant No. 1 by reducing the price of the flat. The Applicant No.1 could have availed the above benefit only if the above project was under execution/implementation before coming into force of the GST as the Respondent would have been eligible to avail ITC on the purchase of goods and services after 01.07.2017 on which he was not entitled to do so before the above date. Since there was no basis for comparison of ITC available before and after 01.07.2017, the Respondent was not required to recalibrate the price of the flat due to additional benefit of ITC. Hence, the allegations of the Applicant No. 1 made in this behalf are incorrect and therefore, the same cannot be accepted.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
1. The present Report dated 25.02.2021 received on 26.02.2021 has been received from the Director General of Anti-Profiteering (DGAP) after investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017.
2. The DGAP vide the above said Report dated 25.02.2021 has stated the following points:-
i. Standing Committee on Anti-profiteering, received an Application filed by the Applicant No. 1, under Rule 128 of the Central Goods and Services Tax Rules, 2017, alleging profiteering in respect of construction service supplied by the Respondent. The above Applicant alleged that the Respondent had not passed on the benefit of input tax credit to him by way of commensurate reduction in the price of Unit No. J-1804 in the Respondent’s project “Roselia-2” situated at Gurugram, Haryana in terms of Section 171 of the Central Goods and Services Tax Act, 2017.
ii. The aforesaid application was examined by the Standing Committee on Anti-profiteering, in its meeting, the minutes of which were received by the DGAP on 24.11.2020. whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter.
iii. On receipt of the reference from the Standing Committee on Anti-profiteering, a Notice under Rule 129 of the Rules was issued by the DGAP on 17/18.12.2020. 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 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 also given an opportunity to inspect the non-confidential evidences/information furnished by the above Applicant during the period 28.12.2020 to 30.12.2020. However, the Respondent did not avail of this opportunity.
iv. Vide e-mail dated 04.02.2021, the Applicant No. 1 was afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on 10.02.2021 or 11.02.2021. The Applicant availed of the opportunity on 11.02.2021 and after inspection of the non-confidential documents submitted a letter dated 11.02.2021 wherein he stated that only balance sheets were shared with him and remaining documents have not been shown to him.
v. The period covered by the current investigation was from 01.07.2017 to 30.10.2020.
vi. The time limit to complete the investigation was 23.05.2021.
vii. In response to the Notice dated 17.12.2020, the Respondent submitted his reply vide letter/e-mail dated 22.01.2021, 18.02.2021 and 22.02.2021. The Respondent placed the following facts to establish that he was not covered under the provision of Section 171 of CGST Act, 2017 and detailed submissions of the Respondent were as follows: –
(a) The provisions of Section 171(1) which had been placed in Chapter XXI of the Central Goods and Service Tax Act pertaining to “Miscellaneous” provisions state the following: – “Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices.”
On the reading of above provision of the section, it was clear that the provision of Section 171 of CGST Act, shall apply only in two cases:
(i) Reduction in rate of tax, and
(ii) The benefit of ITC by way of commensurate reduction in price was to be passed on to the recipient.
(b) The agreements between the Respondent and the buyers of residential project were executed on 06.02.2019, vide which the terms & condition for the allotment, consideration including taxes & other conditions had been mentioned.
(c) All the events i.e. allotment of the Flats on 01.02.2019, agreements between the Respondent & the Buyers executed on 06.02.2019 and construction activities started on 10.04.2019, occurred within GST regime. The transaction between the Builder & the Buyer was covered by clause (b) of paragraph 5 of Schedule II of the CGST Act from the date the buyer was allotted the flat i.e. 01.02.2019 or the date of signing of Builder-Buyer Agreement whichever was earlier.
(d) The Respondent requested to dispose-off the matter by passing speaking order, before proceeding with the investigation.
(e) The issues raised for preliminary disposal was that “Whether the Anti-profiteering proceeding can be initiated on the project where Allotment/Builder Buyers Agreement & the construction activities are made/executed in GST period?”
Without prejudice to preliminary objection, in case the DGAP, still decided to proceed with the investigation, it was requested to dispose of the above mentioned objection by passing speaking order in view of well settle law in the case of M/s GKN Driveshafts (India) Ltd. Vs. (2002) 1 SCC 72. Relevant para of the judgment is reproduced below:
“However, we clarify that when a notice under Section 148 of the Income Tax Act was issued, the proper course of action for the Notice was to file return and if he so desires, to seek reasons for issuing Notice. The assessing officer was bound to furnish reasons within a reasonable time. On receipt of reasons, the Noticee was entitled to file objections to issuance of notice and the assessing officer was bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer had to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years”
(f) The Respondent was engaged in the real estate business activities including development and sale of residential/commercial properties. The Respondent launched his Second Affordable Housing Project namely “The Roselia-2” & allotment of the flats was made on 01.02.2019 under the “Haryana Affordable Housing Policy 2013′. The first Builder Buyer Agreement (BBA) of residential project was executed on 06.02.2019. Similarly, BBA in respect of Commercial Units sold was first executed on 18.02.2019 i.e. during post GST period.
(g) That the Respondent offered the rates for selling flats, before allotment, after due consideration of GST paid/payable on goods & services involved in the execution of the Contract as well as eligible GST credit, which can be set-off against output tax liability.
(h) The consideration for the sale of Flat was duly agreed between the Respondent and the buyer @ 4,000/- per square feet on carpet area basis, besides balcony area @ 500/- per square feet.
Further, GST as applicable too was payable extra. The Builder-Buyer agreement containing all the terms & conditions of allotment was duly executed on 06.02.2019 onwards between the Respondent & the successful applicant.
(i) The construction activities on the aforesaid project were started on 10.04.2019 and thereafter, during GST regime.
(j) Vide the aforementioned letters, the Respondent submitted the following documents/information :-
