Subject Matter
No Profiteering Found; Allegations Against Developer Dropped for Differential GST Collection.
Summary
The anti-profiteering allegations against the developer are dropped as no profiteering was found. The developer collected 5% GST from buyers but discharged 12% GST liability to the government, bearing the differential to maintain market competitiveness, with no short payment or tax evasion substantiated.
Summary of Facts and Dispute:
- Impugned Action: A complaint was filed by an original complainant against the developer, M/s Raja Housing Ltd., alleging profiteering due to the receipt not reflecting the full tax component (GST) paid to the developer. Specifically, the developer collected GST at 5% from flat buyers, despite having opted for the old tax scheme of 12% with ITC benefits.
- Petitioner's Argument: The developer clarified that they opted to continue under the old tax scheme, charging 12% GST with ITC benefit, as per Notification No. 03/2019 GST (Rate) dated 29.03.2019, for a project commenced before 01.04.2019. They collected GST at 5% from flat buyers but discharged the full 12% GST liability to the government, bearing the 7% differential to remain competitive. They explained that issuing invoices at 12% while collecting 5% would cause reconciliation issues. Verification of their books and audit reports found no short payment or evasion of tax.
- Core Question of Law: Whether M/s Raja Housing Ltd. engaged in profiteering by collecting 5% GST from flat buyers while discharging a 12% GST liability to the government under the old tax scheme, and if this differential collection constitutes non-compliance or tax evasion.
Key Legal Issues & Findings:
Verification of Tax Payments and Records
The Screening Committee and State enforcement team conducted a thorough verification of the taxpayer's records and statements. They noted the following findings:
- Tax Scheme Adherence: The developer, for Project – Raja Ritz Avenue Phase-I (commenced before 01.04.2019), chose to continue in the old tax scheme, discharging GST @12% with ITC benefit, as permitted by Notification No. 03/2019 GST (Rate) dated 29.03.2019.
- GST Collection vs. Discharge: While GST was collected from flat buyers @5%, the developer consistently discharged the GST liabilities to the government @12%, bearing the 7% differential to sustain market competition.
- Invoice Issuance Justification: The taxpayer explained that non-issuance of invoices reflecting 12% GST (when only 5% was collected) was to prevent non-reconciliation of sales records and adverse impacts on internal accounts.
- Record Verification: The investigation team verified sample sale deeds, payment vouchers, and customer-wise payment ledgers, confirming that the correct sale consideration, inclusive of 5% GST, was declared to customers, and payments were properly accounted for.
- No Short Payment/Evasion: Verification of the taxpayer's books of accounts and audit reports for tax periods 2017-18, 2018-19, 2019-20, and 2020-21, as well as subsequent audit reports, found no short payment or evasion of tax on the consideration received from customers. The jurisdictional state authority confirmed no short payment or evasion.
- DRC-01 for Invoice Issue: Although a DRC-01 dated 24.02.2025 was issued demanding Rs. 10,35,80,038/- on the specific issue of non-issuance of invoices, the overall tax liability of Rs. 17,01,94,057/- for Raja Ritz Avenue Phase-1 was confirmed to have been discharged.
- Evasion Not Substantiated: Considering the taxpayer's statement and the verification of financial records and corresponding returns, the allegation of tax evasion was not substantiated in the present issue.
Ruling:
- Outcome: The allegations of profiteering against M/s. Raja Housing Ltd. are dropped as no illegality or irregularity was found in the findings of the Karnataka Screening Committee.
- Directions: The proceedings related to the anti-profiteering complaint are closed.
- Liberty: No specific liberty was granted to the Revenue in this order.
NationalFULL TEXT OF THE JUDGMENT/ORDER OF GSTAT
The matter was taken up for hearing in hybrid mode. Ms. Geetika Chib, Additional Assistant Director – Authorized Representative assisted by Shri Awanindra Kumar, Inspector, appeared on behalf of DGAP.
Shri Rajkumar Kadam, Original Complainant appeared before us virtually.
This file was initiated on email received from Standing Committee of the State of Karnataka on Anti-Profiteering. The Original Complainant Mr. Rajkumar Kadam had purchased one apartment from the Respondent M/s Raja Housing Ltd. He complained that the receipt issued by the Respondent to him does not reflect the tax component (GST) paid to the developer. The matter was taken up by Screening Committee of the State of Karnataka. The Screening Committee has considered the matter along with the report submitted by the investigation wing of the Bangalore South Commissionerate and the State enforcement team. Screening Committed further minuted that as per the Investigation Report, Project – Raja Ritz Avenue Phase-I was commenced before 01.04.2019 and in terms of Notification No.03/2019 GST (Rate) dated 29.03.2019 they preferred to continue in the old tax scheme i.e., @12% tax with land exemption with benefit of ITC
Though they opted for the old tax regime and preferred to pay GST @12%, they had been collecting GST from the flat buyers @5% only and the differential tax @ 7% were borne by them in-order to sustain the market competition.
The Screening committee further minuted that addressing the issue of non-issuance of GST invoices in proper format, the taxpayer clarified that since the collection of GST was @5%, while they were discharging GST liabilities to the government @12%, issuance of invoices would have resulted in non-reconciliation of sales record and would have impacted the internal accounts. It was further minuted that Sample sale deed, payment vouchers and the ledger have been verified by the investigation team and confirmed that the taxpayer has declared the correct sale consideration inclusive of GST@5% in the respective sale deeds to the customers; issued payment vouchers against payment received from the customers and has also maintained payment ledger customer wise.
Further, the Screening Committee Reports on verification of books of accounts of the taxpayer for the tax periods of 2017-18, 2018-19, 2019-20 and 2020-21 and respective audit report, there have been no findings with regard to short payment of tax on the consideration received from the customers.
Therefore, the jurisdictional state authority had communicated vide their letter dated 19/12/2024, that there is no short payment /evasion of tax in this issue.
The Screening committee further minuted that the officers of the State enforcement have also verified the records of the taxpayer for the tax period 2018-19 to till date and the said verification have been concluded with the issuance of DRC-01 dated 24.02.2025, demanding Rs. 10,35,80,038/-, on the issue of non-issuance of invoices to the customers of Raja Ritz Avenue Phase-I. On verification of the Audit reports of the taxpayer for the period from 2017-18 to till date, the GST collection records in respect of Raja Ritz Avenue Phase-1 from the relevant ledgers, financial records and corresponding returns, it was found that, the taxpayer, in respect of Raja Ritz Avenue Phase-1 has discharged a total tax liability of Rs.17,01,94,057/-.
Considering the statement of the taxpayer, verification of relevant financial records and corresponding returns, evasion of tax in the present issue is not substantiated.
In that view of the matter, after receipt of the Minutes of the Karnataka State Screening Committee notice was issued to the original complainant to file objections, if any, to such findings. He has not filed any written objections
Today, we have heard original complainant in-person appearing before us virtually, we find no illegality / irregularity in the Minutes of the Karnataka Screening Committee and arrived at the conclusion that there is no profiteering in this case. Hence, the allegation against M/s. Raja Housing Ltd. is liable to be dropped.
Proceedings is therefore closed.