Ruling over “Profit established as builder as an ITC shall be passed on to the buyer”

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Manish Saini vs. Ramaprastha promoter & developer pvt Ltd

ITC as a percentage of the turnover which was available to the Respondent during the pre-GST period (April-2016 to June-2017) was 1.72% and the same during the post-GST period (July-2017 to December-2018) was 2.64%.

This confirms that, post-GST, the Respondent has been benefited from additional ITC to the tune of 0.92% (difference between 2.64%­ & 1.72%) of his turnover and the same was required to be passed on to the Applicant No.1 and the other property(flat) buyers.

The DGAP has calculated the amount of ITC benefit to be passed on to all the flat buyers as ₹35,28,744/- on the basis of the information supplied by the Respondent, which is admitted by the Respondent and hence the amount of profiteering computed by the DGAP is , hereby, accepted as correct.

Thus , it is ruled that ,”Respondent has denied benefit of ITC to his homebuyers in his Project “Edge Towers” in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has, thus, committed an offence u/s 171 (3A) of the above Act. So, he is liable to be penalized under the provisions of the above Section.

Accordingly, a notice be issued to him directing him to explain as to why the penalty prescribed u/s 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on him. Accordingly, the notice dated 19.06.2019 vide which it was proposed to impose penalty under Sections 29 and 122-127 of the above Act read with Rule 21 and 133 of the CGST Rules, 2017 is withdrawn to that extent.

It is clear to that the Respondent has profiteered in the project “Edge Tower”.Therefore, as per the provisions of Section 171(2) of the CGST Act, 2017 , Authority has reasons to believe that there is a need to verify all the Input Tax Credits of the Respondent so as to arrive at the aggregate profiteering of the Respondent.

Since the profiteering on the part of the Respondent has already been established in this project as the fact came to picture where supplies from various projects of the Respondent are being made through a single GST registration and the same ITC Pool/Electronic Credit Ledger is being used for all the supplies being made from that registration.

Therefore, the Authority with the provisions of Section 171(2) of the CGST Act, 2017 and as per the amended Rule 133 (5) (a) of the CGST Rules 2017 directs the DGAP to further examine all the other projects of the said Respondent for possible violations of the provisions of Section 171 of the CGST Act 2017 and to submit his Report as per the provisions of Rule 133 (5) (b) of the CGST Rules, 2017 since there are adequate reasons to believe that the Respondent may not have passed on the benefit of ITC to his recipients in terms of Section 171(1) of the Act.

The Authority as per Rule 136 of the CGST Rules 2017 directs the jurisdictional Commissioners of CGST/SGST Haryana to monitor this order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as ordered by the Authority is passed on to all the eligible buyers.

The detailed case can be read here :Case file

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