In Re. Pyramid Infratech Pvt. Ltd.,
GST
2018 (9) TMI 1107 – NATIONAL ANTI-PROFITEERING AUTHORITY – TMI
NATIONAL ANTI-PROFITEERING AUTHORITY – NAPA
Dated:- 18-9-2018
7/2018
GST
SH. B. N. SHARMA, CHAIRMAN, SH. J. C. CHAUHAN, TECHNICAL MEMBER, MS. R. BHAGYADEVI, TECHNICAL MEMBER
Present:-
S/Shri S. K. Jain, Shri Bharat Bhushan and 12 others on behalf of Applicant No. 1.
S/Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal Assistant Director (Costs) for the Applicant No. 2.
Shri Dinesh Sharma Managing Director and Shri J. P. Gaur Chief Finance Officer on behalf of the Respondent.
ORDER
1. The brief facts of the this case are that Under Rule 128 of the Central Goods and
Service Tax (CGST) Rules, 2017, 36 applications were filed before the Haryana State Screening Committee alleging that the benefit of Input Tax Credit (ITC) had not been passed on to the Applicants in respect of the construction service supplied by the Respondent. The Applicants ar
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urav Kumar Aggarwal*
lavi22oct@gmail.com
23
Ravi Verma
ravics136@gmail.com
24
Sanjeev Chadha*
sanjeev_chadha35@yahoo.co.in
25
Sangam Shukla
er.sangam@gmail.com
26
Udayan Kishore Mishra*
udayankishoremishra@gmail.com
27
Manoj Jangraa
mj.jangraa@gmail.com
28
Ravi Yadav
dear.raviyadav@gmail.com
29
Zeeshan Ali Quazi*
er.zeeshan99@gmail.com
30
Sunil Kumar Jha*
lakshya.skjha@yahoo.com
31
Vikash Gupta*
vikash.gupta7878@gmail.com
32
Anoop Kumar
anoop_0406@yahoo.com
33
Rajesh Kumar*
rajeshkumar.cs06@gmail.com
34
Vikash Garg*
sperry.it@gmail.com
35
Jofin Mathew
jofinmathew@gmail.com
36
Bharat Bhushan Badesra*
bbbadesra@gmail.com
*Applicants who have filed more than one application:-
2. The above Applicants had booked flats with the Respondent under the Haryana Affordable Housing Policy 2013 (here-in-after referred to as the Policy), notified by the State of Haryana vide Notification No. PF-27/48921 dated 19.08.2013. They had alleged that before coming
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ccordingly they had filed several applications with the Haryana Screening Committee for appropriate redressal of their grievance. These applications were examined by the Screening Committee in its meeting held on 30.10.2017 and it was decided to forward these applications to the Standing Committee on Anti-profiteering for further necessary action. The Standing Committee in its meeting held on 07.11.2017 after confirming that prima facie there was evidence of non-compliance of the provisions of Section 171, had forwarded these applications to the Director General of safeguards (DGSG) now redesignated as Director General of Antiprofiteering(DGAP) for detailed investigation. 102 additional applications against the Respondent were also received by the Standing Committee which were also forwarded to the DGAP for investigation. The following are the names of the additional Applicants who had filed applications with the Standing Committee:-
S.No.
S/Sh.
E-mail ID
1
Rohit Yadav
rohit.yada
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ail.com
24
Praveen Kumar Sharma
praveensha77@gmail.com
25
Abhishek Yadav
abhishekyadav.nnl@gmail.com
26
Ashish Gupta
mnit.ashish2006@gmail.com
27
Rahul Rajoriya
rahul.rajoriya08@gmail.com
28
Gagan Batra
gaganbatra85@gmail.com
29
Manisha Jain
jain5175@gmail.com
30
Parvesh Chopra
parveshchopraa@gmail.com
31
Rakesh Yadav
rakeshdagar83@gmail.com
32
Sunil Saini
sainisunil92@yahoo.com
33
Raj Kumar*
rajkumar032002@yahoo.com
34
Ankur Chawla
aim.ankur@yahoo.co.in
35
Shailendra kumar
skumar_025@yahoo.co.in
36
Shalini Bisht
shaliniissarbisht@gmail.com
37
Santosh Kumar Agarwal
santoshkumar.engg@gmail.com
38
Suresh Kumar
kumarsuresh151979@gmail.com
39
Ashish srivastava
ashishdra@gmail.com
40
Pradip sarin
pradipsarin@yahoo.com
41
Rahul Yadav
rahulrao1206@gmail.com
42
Richa Jha/Priyanka Jha
richaignou95@gmail.com
43
Prem Prakash
prm185@gmail.com
44
Diwakar Singh
diwakar_chahar@yahoo.com
45
Samreen Raza
samreenraza2000@yahoo.com
46
Ra
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om
67
Pankaj Kumar
pankaj@nsk.com
68
Sandeep Sharma
sandeep.121.sharma@gmail.com
69
Kiran Mishra
kiranmishra.2007@gmail.com
70
Saurabh Jain
saurabhs20@yahoo.com
71
Nitesh Rohilla*
nitesh.rohilla001@gmail.com
72
Rajdeep Yadav
yadav_raj7@rediffmail.com
73
Sachin Batheja
sachin.batheja@yahoo.com
74
Souvik Ghosh
souvik.ghosh@hotmail.co.in
75
Rajendra Singh Chahar/
Anuraj Singh
anuraj2110@gmail.com
76
Rajesh Kumar Jain
rajeshkjain.99@gmail.com
77
Vikas Gupta*
vikas.gupta7878@gmail.com
78
Rahul Kapoor*
rkapoor_87@rediffmail.com
79
Anil Dwivedi*
anilcs250@gmail.com
80
Amit Kumar Thakur
amitthakurlic@yahoo.in
81
Deepak Gupta
deepacgupta@gmail.com
82
Bansi Lal Mahlawat
a_Bansi.Mahlawat@airtel.com
83
Dharam Narayan Tiwari/
Shashi Vir Singh
shashivir@yahoo.com
84
Alok Kumar Singh*
alokmechboy@gmail.com
85
Mridul Verma
mridul_varma@yahoo.co.in
86
Prateek Sharma*
prateek.psharma@gmail.com
87
Paramjeet Singh
param194@gmail.com
8
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the DGAP mentions 109 Applicants out of the 138 Applicants out of which in as much as 26 have filed duplicate applications and 2 have submitted triplicate applications.
4. The DGAP in his report has stated that a notice was issued to the Respondent under Rule 129 of the CGST Rules, 2017 to submit his reply regarding the allegations that the benefit of ITC had not been passed on to the above Applicants on the purchase of the flats and also to suo moto declare the amount of profiteering. Since the Respondent failed to submit all the documents within the prescribed time extension was sought by the DGAP for completing the investigation. The Standing Committee vide it's minutes of the meeting dated 28.02.2018 had granted extension of 3 months in terms of Rule 129 (6) of the CGST Rules 2017. The DGAP has also reported that after issue of a number of summons the Respondent vide his letters dated 11.01.2018 & 19.02.18 had submitted various documents such as:-
1. Independent Auditor's Repor
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ent had also submitted the following data as has been depicted in the Table below to show that the ITC on Excise Duty, Countervailing Duty (CVD) and capital goods which was not available earlier was now available:-
S. No.
Nature of pre-GST Tax
Total Amount (In Rs.)
1
Excise Duty/CVD included in cost, now available as ITC
46,91,507/-
2
Credit on Capital Goods capitalized not available earlier but now available
2,05,50,719/-
3
Central Sales Tax (CST)
For material 12,04,661/- for capital goods 24,47,563/- Total Rs. 36,52,224/-
4
Total ITC (1+2+3)
2,88,94,450/-
5
ITC part of Cost
46,91,507/- + 12,04,661/-=58,96,168/-
6
Cost of Sale (before interest)
50,44,57,118/-
7
Interest
44,83,288/-
8
Cost of Sale after interest (6+7)
50,89,40,406/-
9
Net Sales Realization
1,21,79,69,823/-
10
Profit (9-8)
70,90,29,416/-
11
Percentage of ITC to Sales Realization (4 as % of 9)
2.37%
6. The report also submits that the Respondent had claimed tha
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lizing the ITC was being paid in cash, therefore, the ITC being allowed was not an additional benefit and the GST liability was not entirely covered by the ITC available to the Respondent. The Respondent had also claimed that he was required to pay GST on the sub-contracted work which was an additional cost to him whereas Service Tax was exempted in the past. He had further claimed that there had been tremendous increase in the prices of inputs including Steel due to which no profiteering could be alleged against him.
7. The DGAP's report also states that two of the Applicants viz. S/Sh. Sukhbir Singh and Ashutosh Fotedar vide their joint letter dated 07.05.2018 had submitted that the Respondent could charge maximum allotment rate of Rs. 4,000/- per sq. ft. carpet area which was inclusive of all costs as was prescribed under the Policy. The DGAP has also informed that one of the Applicants viz. Shri Bharat Bhushan Badesara vide his e-mail dated 12.03.2018 had submitted a copy of the '
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the two projects viz. (1) Urban Homes, Sector 70A, Gurugram and (2) Urban Homes, Sector-86, Gurugram which are being executed by the Respondent under the above Policy. He has further informed that after perusal of the application filed by the Respondent before the Haryana Real Estate Regulatory Authority (RERA) and as per para 5 (i) of the Policy, it was clear that the maximum sale price per sq. feet carpet area had been fixed at Rs. 4,000/- and no minimum rate had been prescribed and hence, the Respondent could not claim that there was restriction on reducing the price. The DGAP has also submitted that the Respondent's claim that Section 171(1) of the CGST Act, 2017 relating to benefit of ITC was not attracted, as there was no reduction in the GST rate was also not acceptable because the conditions of passing on the benefit of reduced tax rate and benefit of ITC were two independent conditions and Section 171 of the CGST Act, 2017 was attracted if both or either of these two condition
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-, the DGAP has estimated the VAT liability of the Respondent as 9% of the net taxable value (abated value) and 5.098% of the gross amount of Rs. 2,92,49,55,429/- received from the Applicants.
11. The DGAP has also reported that on examination of the GSTR-3B Returns filed by the Respondent it was revealed that the ratio between the taxable turnover and the ITC availed by him in the post-GST era w.e.f. July 2017 to February 2018 was 7.20%.
12. The DGAP has also mentioned that the Central Government had imposed 18% GST with effective rate of 12% in view of 1/3rd abatement on value on the Construction Service vide Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and the GST rate on the above Service in respect of the Affordable Housing Schemes was reduced to 8% vide Notification No. 1/2018-Central Tax (Rate) dated 25.01.2018. The DGAP has also analyzed the issue of profiteering for the pre-GST period from April 2016 to June 2017 when VAT was payable @ 5.25% and the post-GST
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12%(GST)
8%(GST)
13. Based on above data the DGAP has concluded that the ITC available to the Respondent during the pre-GST period from April 2016 to June 2017 was 1.10% of the taxable turnover and during the post-GST period from July 2017 to February 2018, the ITC available to the Respondent was 7.20% of the taxable turnover and thus there was additional benefit of ITC to the tune of 6.10% (7.20%-1.10%) in the post-GST era, covering the period from July 2017 to February 2018 to the Respondent. The DGAP has also stated that for the period w.e.f. 01.07.2017 to 24.01.2018 while the additional ITC available was 6.10% of the taxable turnover, the tax rate had increased by 6.75 % (12%-5.25%), leaving no benefit of ITC to be passed on to the Applicants. On the other hand, during the period between 25.01.2018 to February, 2018, the additional ITC of 6.10% of the taxable turnover was more than the increase in the tax rate by 2.75% (8%5.25%), requiring the Respondent to pass on the
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s meeting held on 5.07.2018 had decided to hear the Applicants and the Respondent on 23.07.2018. Accordingly notices were issued to all the interested parties. On behalf of the Applicants Sh. Rajesh Kumar Jain, Bharat Bhushan and 6 other Applicants appeared and the DGAP was represented by Sh. Akshat Aggarwal Assistant Commissioner and Sh. Bhupender Goyal, Assistant Director (Costs). On the request of the parties another hearing was held on 01.08.2018 wherein S/Sh. Bharat Bhushan and R. K. Jain along with 12 other Applicants had appeared.
During both the hearings the Respondent was represented by Sh. Dinesh Sharma, Managing Director along with Sh. J. P. Gaur, Chief Finance Officer, who submitted their written submissions, on 1st August, 2018.
15. In his written submissions, the Respondent has claimed that the amounts of Rs. 50,44,57,118/- and Rs. 50,89,40,406/- mentioned in the report of the DGAP were the costs incurred on construction and not the costs of sales during the period and
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and hence the initial payments on application, allotment and few periodical installments were meant for funding the above mentioned costs which on an average amounted to 40-45% of the total revenue from the Applicants. The Respondent has also claimed that the percentage of expenditure on construction was far more than the percentage of collections made from the Applicants. He has also argued that besides construction cost there were other expenses as had been mentioned above which needed to be considered before arriving at the profit margin.
16. The Respondent has further submitted that though the benefit of ITC was made available, the basic cost of the raw material had increased abnormally which had resulted in setting off of the benefit of ITC. the Respondent has also claimed that in the post-GST period basic cost of Steel was higher than the cost of Steel during the pre-GST period which had resulted in extra expenditure of Rs. 4,34,80,082/- while the ITC amounted to only Rs. 3,97,1
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amount spent on construction during this period was only 25% of the total cost and hence he would receive 37.50% of total payment due during the post-GST period when he would have to spend 75% of the total cost on construction. The Respondent has also claimed that the initial consideration paid by the Applicants was towards the cost incurred/ to be incurred by him against the cost of land, licenses, approvals, administrative and financial expenses which amounted to 40-45% of the total revenue from the Applicants. He has also submitted that while calculating the ITC against the taxable value during the pre-GST period, the taxable value should be accordingly adjusted by giving effect to the above issues during the pre-GST and post-GST period and percentage of ITC should be accordingly recalculated.
19. Finally the Respondent has prayed that the following points needed to be considered by the Authority before concluding that profiteering has been done by him.
a). The taxable value shou
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They also claimed that the Respondent had recovered VAT @ 5.25% from the Applicants but had paid the Government @ 5.09%. They also requested for imposition of penalty and for early disposal of the case so that the benefit if any was provided to them before the last installment was paid to the Respondent.
22. They also claimed that the increase or decrease in cost on account of the factors other than tax rate and ITC was not to be considered for the purpose of profiteering. They further claimed that the maximum rate of Rs. 4,000/- per sq. ft. carpet area was fixed and any escalation in the cost had already been taken into account at the time of fixing of the above rate. They also submitted that any increase or decrease in the raw material prices was a market phenomenon which was not related to the GST and therefore, the cost escalation factor was not required to be considered by the Authority.
23. The Applicants have also argued that the extra liability claimed by the Respondent on a
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er, 2017 to February, 2018. This ITC was approximately Rs. 8.70 Crores and was utilized to the extent of Rs. 5.40 Crores for payment of GST by him. They also pleaded that the Respondent was fully aware that the ITC should have been passed on to the buyers after re-calibrating the price, which had not been done deliberately by him which attracted penal provisions under the anti-profiteering law.
25. The Applicants have also attached copies of the e-mail dated 14.07.2018 and reminders dated 21.07.2018 & 26.07.2018 sent by their Association to the Respondent requesting him to extend the benefit of ITC which the Respondent had failed to respond to.
26. Finally the applicants have alleged that during the period between 01.07.2017 to 24.01.2018 the benefit which had accrued to the Respondent was 6.1% as per the calculations given below:-
Re-calibrated rate – Rs. 4,207 (Rs.3,756 + 12% GST)
Already billed and collected rate – Rs. 4,480 (including 12% GST) Effective rate to be returned to t
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ing the hearing held on 23rd July, 2018, the DGAP in his reply dated 1st August, 2018 has submitted that for the period before 01.07.2017 the output rate of VAT on the Respondent was 5.25% with an ITC of 1.1% and during the period between 01.07.2017 to 24.01.2018, the output rate of GST was 12% but an additional ITC of 6.1% (7.2%-1.1%) was available to the Respondent, which should have been passed on to the Applicants and 12% GST should have been charged on such reduced amount and therefore, the effective output rate of tax for the Respondent would be 12% of 93.9 (100-6.1) =11.27%. He has also submitted that similarly, for the period after 25.01.2018, the output rate of GST was 8% but additional ITC of 6.1% (7.2%-1.1%) was available to the Respondent which should have been passed on to the Applicants and 8% GST should have been charged on such reduced amount and hence the effective output rate of GST for the Respondent would be 8% of 93.9 (100-6.1) =7.51%. The DGAP has admitted that th
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of = 6.1% (4480-4207/4480 x 100). He has further stated that during the period between 25.01.2018 to 31.03.2018, the installment including GST should be Rs. 3756 + 8% GST= Rs. 4056/- per sq. ft., however, the Applicants had been charged Rs. 4000 + 8% GST i.e. Rs. 4320/- which came to profiteering of = 6.1% (4320-4056/4320 x 100) and hence 6.1% of the amount paid by the Applicants during the entire period from 01.07.2017 to 28.02.2018 was the profiteered amount.
29. We have carefully examined the DGAP's Report, the written and oral submissions of both the Applicants and the Respondent placed on record. The issues to be decided by the Authority are as under:-
(a.) Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 in this case?
(b.) If yes then what was the quantum of profiteering?
30. Perusal of Section 171 of the CGST Act shows that it provides as under:-
171. (1) Any reduction in rate of tax on any supply of goods or services or the benefit of
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been extended to all the goods and services which were utilized by any builder which was not available in the pre-GST era. This fact has not been denied by the Respondent. Since Section 171 not only deals with passing on the benefit of reduction in the rate of tax but also deals with passing on the benefit of ITC therefore the contention made by the Respondent is legally not correct to the extent that there had been increase in the rate of tax from 5.25% to 12% and then 8% and no benefit could be passed on by him to the Applicants as the Respondent had become entitled to claim ITC the benefit of which was required to be passed on by him to the Applicants as per the provisions of Section 171. The Respondent has also admitted that he had become eligible to claim ITC after coming in to force of the GST and hence he was liable to pass on the benefit to the Applicants.
31. It is also revealed from the submissions made by the Respondent that he was building flats and selling them to the App
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maximum sale price for each flat would be Rs. 4000/- per sq. ft. carpet area. Therefore, the claim of the Respondent that the price was fixed at Rs. 4000/- by the Haryana Government is incorrect as he had himself made offer of selling the flats at the above rate. It is also clear from the perusal of the above para that the above price was the maximum price and there was no restriction on the Respondent to charge less price. The Respondent had chosen to collect the maximum rate fixed by the Policy and therefore his plea that the rate reduction was not possible was not correct. Moreover the rate offered by the Respondent did not include taxes and it is a fact that the Applicants had paid 5.25% VAT in the pre-GST era and GST @ 12% and 8% for the period between 01.7.2017 onwards. The Buyer's Agreement vide paras 4.1, 5.3 and 5.5 clearly indicates that the Applicants were liable to pay all the taxes as applicable. Para 5.3 of the agreement states that, “the sale consideration does not incl
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ability was 9% of the net taxable value and his liability was 5.098% of the unabated gross value of Rs. 2,92,49,55,429/-. During the year 2017-18 for the first quarter the taxable turnover was Rs. 7,69,35,214/- while the output tax liability was Rs. 39,21,893/-. Thus the total taxable turnover of these two periods was Rs. 30,01,89,06,44/- while the output tax liability was Rs. 15,30,26,066/- and the ratio of ITC to the taxable turnover was 1.10%. Similarly the taxable value for the period from July 2017 to February 2018 was Rs. 1,20,78,06,878/- while the tax liability was Rs. 12,56,42,894/- and the ITC ratio to taxable turnover was 7.20%. These facts have also not been disputed by the Respondent but what was disputed was that the above ratio should be calculated taking into account the cost of construction rather than the taxable turnover. This argument does not hold good because the Policy makes it mandatory on him that he could not charge more than Rs. 4000/- per sq. ft., the price w
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ent has not placed any concrete facts or reasons on record to dispute the same.
33. The Respondent has pleaded that since the cost of Steel one of the major raw materials had increased this increase should have been accounted for before alleging profiteering. This argument of the Respondent is not tenable since he had himself offered the maximum price of Rs. 4000/- and there was no provision of revision of this price on the basis of escalation in the price of the raw material in the Policy. The Applicants have also rightly objected to this pleading stating that the price fluctuations were considered at the time of fixing of the rate of Rs. 4000/- per sq. ft. From the details given by the Respondent no conclusion can be arrived at without considering the cost of all the inputs and their cost since for most of the building material there had been rate rationalization and all the raw material was available without CST across the country. Since he has claimed that 75% construction had bee
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pondent, which had not been taken into consideration while fixing the cost of the flats. Therefore the contention of the Respondent that the cost factor should be taken into account is not valid and justifiable as there is no escalation clause in the Agreement and the Respondent has also availed benefit of interest on the amount paid by the Applicants.
34. One of the arguments advanced by the Respondent is that in the pre-GST regime there was no tax liability on the sub-contractors and in the post-GST era the tax levied on the sub-contractors was to be borne by the Respondent. This argument is also not tenable because the entire amount is eligible for ITC to the Respondent which has been admitted by him in his written submissions. Moreover the sub-contractors are also eligible for ITC which was not available to them earlier and on account of rationalization of tax rates many of the inputs were now available at the reduced rates.
35. From the above narration of facts it is absolutely
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lculations and submitted that the actual benefit that the Respondent has to pass on to all of them was to the extent of 6.1% for both the periods when the tax was levied @ 12% as well as when the tax was levied at @ 8%. In his subsequent report called for by the Authority from the DGAP, he has submitted the revised calculations which are reproduced below. The total amount of profiteering as calculated by the DGAP is also mentioned in the subsequent table:-
Particulars
Amount (in Rs.)
Basic Sale Price Collected for both the projects (Rs.)
Jul-17
A
–
Aug-17
B
72,49,48,683
Sep.17
C
1,59,171
Oct,17
D
–
Nov.17
E
2,58,475
Dec.17
F
2,54,237
Jan.18
G
–
Total Basic Sale Price Collected for both the projects during July, 2017 to January, 2018 (Rs.)
H= Total of A to G
72,56,20,566
GST @ 12% Collected
I=H*12%
8,70,74,468
Actual Amount Collected
J=H+I
81,26,95,034
Benefit of 6.10% of Basic Sale
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e followed by the DGAP i.e. 6.1% of profiteering and accordingly the amount of profiteering has been calculated for each type of flat to arrive at the profiteering amount for each and every buyer depending upon the type of flat he has purchased. In view of the above the Authority determines the amount of profiteering as Rs. 8,22,80,998/- for all the 2476 flats.
38. The DGAP has calculated the profiteering @ 6.1% on the base price of Rs. 4000/- per sq. ft. and accordingly calculated tax amount on the reduced payment. The calculations made by the DGAP are placed below which are correct and the Authority is in full agreement with the same:-
Head
Row
Profiteering Calculation
X
Calculation
GST @12%
GST @8%
Rate (Per Sq. Ft.)
A
4000
4000
Profiteering @6.1%
B
244
244
New Rate (Per Sq. Ft.)
C
A-B
3756
3756
GST @X%
D
X% of C
450.72
300.48
Total Amount to Be Charged
E
C+D
4206.72
4056.48
Amount Already Charged
F
A + X% of A
4480
4320
P
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ting the last installment along with the interest @ 18% per annum to be calculated from the date of the receipt of the excess amount from each buyer, within a period of 3 months from the date of receipt of this order.
41. It is evident from the above that the Respondent has denied benefit of ITC to the buyers of the flats being constructed by him under the above Policy in contravention of the provisions of Section 171(1) of the CGST Act, 2017 and has thus realized more price from them than he was entitled to collect and has also compelled them to pay more GST than that they were required to pay by issuing incorrect tax invoices and hence he has committed an offence under section 122 (1) (i) of the CGST Act, 2017 and therefore, he is liable for imposition of penalty. Accordingly, a Show Cause Notice be issued to him directing him to explain why the penalty prescribed under Section 122 of the above Act read with rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him.
42.
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