DG Anti Profiteering Vs Angelo’s VNCT Ventures LLP: GSTAT sends matter back to DGAP to verify ITC benefit claim
Background of the dispute
A complaint was lodged by an individual home buyer, Shri Selvakumar V, in respect of a villa (No. D3) booked in the real estate project “VNCT Lotus Villas” being developed by Angelo’s VNCT Ventures LLP. The grievance was that, after the implementation of GST with effect from 01.07.2017, the benefit of additional Input Tax Credit (ITC) accruing to the developer was not passed on to the assessee by way of a corresponding reduction in price, as mandated under Section 171 of the Central Goods and Services Tax Act, 2017.
The complaint was placed before the Standing Committee on Anti-profiteering, which, on finding a prima facie case, referred the matter to the Director General of Anti-Profiteering (DGAP) for a detailed investigation.
DGAP’s investigation and computation of profiteering
Scope of the investigation
- The DGAP initiated proceedings, issued notice to the Respondent (developer), and called for relevant documents, transactional details, and replies.
- The Respondent opted, with effect from 01.04.2019, to discharge GST at a concessional rate of 5% without entitlement to ITC under the new real estate scheme.
- Consequently, ITC was actually availed only up to the end of FY 2018–19, and no ITC was available thereafter.
- On this basis, the DGAP confined the profiteering period up to 31.03.2019.
Methodology adopted by DGAP
The DGAP compared the ratio of tax credits to the value of inputs and input services:
- For the pre-GST period, it examined:
- Purchase value of goods and services
- Credit of Service Tax
- Credit of VAT
- For the post-GST period, it examined:
- Purchase value of goods and services
- Net ITC of GST availed
From this data, the DGAP computed:
- Pre-GST ITC to cost ratio: 6.37%
- Post-GST ITC to cost ratio: 16.96%
This led to a difference of 10.59%, treated as additional ITC benefit attributable to the introduction of GST.
Profiteering amount as per DGAP
Using the above ratio, DGAP proceeded as follows:
- Purchase value of goods and services (excluding taxes and duties) during the post-GST period: Rs. 4,79,56,086
- Incremental ITC benefit @ 10.59% of the above:
- Total ITC benefit estimated: Rs. 50,78,550
The DGAP then allocated this incremental ITC across the project:
- Total saleable area of the project: 1,54,933 sq. ft.
- Total area sold prior to opting for 5% without ITC option: 1,34,420 sq. ft.
- ITC saving per sq. ft. (benefit per unit area): Rs. 32.78
On that basis:
- Total alleged profiteering: Rs. 44,06,288
- Applicable GST @ 12%: Rs. 5,28,754
- Aggregate amount: Rs. 49,35,042
The DGAP noted that all beneficiaries (unit buyers) were identifiable from the project records provided by the Respondent, and therefore the amount could, in principle, be distributed amongst them.
On this analysis, the DGAP concluded that the Respondent had contravened Section 171 of the CGST Act, 2017, by not passing on the ITC benefit commensurately.
Respondent’s defence before GSTAT
The Respondent (developer) filed a detailed written submission along with various annexures and tables challenging the DGAP’s findings.